Risk dashboard

The risk dashboard presents EIOPA's quarterly risk assessment of the European Union insurance industry

Risk Dashboard April 2022 (Q4-2021 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.

 

Key observations:

  • European insurance sector remains resilient, but macro and digitalisation and cyber risks at a high level.
  • Macro-related risks are currently the main concern for the insurance sector, remaining at high level in current assessment reflecting the Russian invasion to Ukraine. Forecasted GDP growth at global level decreased until Q4 2022 and inflation forecasts for main geographical areas show an upward trend, with an average above 5%. 10 year swap increased and unemployment rates decreased. Monetary policies remain broadly accommodative, asset purchases continue amid at a slower pace and will further slowdown.
  • Credit risks have not changed significantly and remain relatively moderate. The CDS spreads remain at low levels for government bonds and financial secured bonds, but increased for financial unsecured and non-financial corporate bonds in the first quarter of 2022. The median investment in bonds and loans has changed in the last quarter of 2021. The median average credit quality of insurers’ investments remained stable. The median of below investment grade assets (with a credit quality step higher than 3) in insurers’ portfolios slightly increased.
  • Market risks overall did not increase compared to the previous assessment, notwithstanding the significant impact of Russian invasion of Ukraine. Volatility in bond market and equity market increased in the first quarter of 2022 reflecting uncertainties related to the geopolitical situation. Property prices increased in the last quarter 2021. The median insurers’ exposure to bonds, equity and property remained hovering around previous levels.  
  • Profitability and solvency risks remain at medium level. Solvency position for groups increased, while the SCR ratio for solos life and non-life undertakings slightly dropped. Return on excess of assets over liabilities and return on assets decreased, remaining above the 2020 levels.
  • Interlinkages and imbalances risks remain at medium level with insurance groups’ exposure to insurances reporting a drop. The median investments in other financial institutions raised.
  • Market perceptions remain at medium level. The life and non-life insurance sector underperformed the stock market and the median price-to-earnings ratio decreased.
  • Climate risks are at medium level, with transition risk and physical risk stable. The median growth of insurers’ investment in green bonds has slightly increased. The y-o-y growth of green bond outstanding has also been volatile and it increased in the last quarter. The catastrophe loss ratio slightly decreased compared to the previous quarter.
  • Digitalisation and cyber risks increased to 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. Cyber negative sentiment indicates an increased concern in the first quarter of 2022. The frequency of cyber incidents impacting all sectors of activity, as measured by publically available data, increased significantly since the same quarter of last year.

Notes:

  • Reference date for company data is Q4-2021 for quarterly indicators and 2020-YE for annual indicators. The cut-off date for most market indicators is end March 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.