Risk Dashboard July 2022 (Q1-2022 Solvency II Data)
Note: The structural break as of Q1 2020 related to the Brexit withdrawal agreement and represented with a dashed line indicates a break in the number of undertakings of the time series and rebalance of the country weights. Additionally, adjusted time series for EU27 before Q1 2020 are also disclosed to reflect potential variations driven by the structural break in the sample.
The European Insurance and Occupational Pensions Authority (EIOPA) published today its Risk Dashboard based on Solvency II data from the first quarter of 2022. The results show that insurers’ exposures to macro, market and digitalisation risks are currently the main concern for the insurance sector. The other risk categories, such as insurance as well as profitability and solvency risks stay at medium levels.
Macro-related risks remain a key source of concern. Forecasted GDP growth at global level further decreased until Q2 2023, while inflation forecasts for main geographical areas remain at higher level reached in the previous assessment. Central banks are adjusting their action, the global average policy rate increased and asset purchases continue amid at a slower pace and will further slowdown. 10-year swap rates increased across currencies.
Market risks are currently at high level. Volatility in bond market increased and in equity market remained at high levels. Property prices slightly further increased. The median insurers’ exposure to bonds has been slightly decreasing, exposure to equity remained relatively unchanged and exposure to property slightly increased in Q1 2022. Credit risks remain relatively moderate, but CDS spreads further increased for financial unsecured and non-financial corporate bonds and the median exposure to below investment grade assets (with a credit quality step higher than 3) slightly increased.
Profitability and solvency risks remain at medium level. Given the increasing trend of interest rates since the beginning of the year, solvency position for life undertakings raised, while solvency position for groups dropped. Insurance risks remain at medium level in Q1-2022. The median of return on investment for life undertakings decreased. The year-on-year premium growth for non-life reported a substantial increase, while for life a slight decrease was observed.
Market perceptions remain moderate. Non-life insurance stocks slightly outperformed the stock market, while life stocks returns were in line. The median price-to-earnings ratio decreased.
Climate risks remain at medium level. Insurers slightly increased the share of green bonds in their assets portfolio, while the ratio of investments into green bonds over the total green bond outstanding slightly decreased.
Digitalisation and cyber risks are at high level. The materiality of these risks for insurance as assessed by supervisors increased given the resurge of cyber security issues and concerns of a hybrid geopolitical conflict.
- Reference date for company data is Q1-2022 for quarterly indicators and 2021-YE for annual indicators. The cut-off date for most market indicators is end June 2022.
- Risk Levels are based on a 4-level scale from Low (green) to Very high (red). Risk trend reports the quarter on quarter variation of the risk based on a 5-level scale from Substantial Decrease to Large Increase.