EIOPA warns of environmental risks in latest Financial Stability Report

Written by Adam Cadle

13/12/2021

Environmental risks are the top risk in terms of the highest expected increase in materiality for the insurance and pension sectors given that extreme weather events grow in intensity and frequency, EIOPA has said.

Publishing its December 2021 Financial Stability Report today, EIOPA said “supervisors need to ensure that robust risk management practices, especially at reinsurers, are in place to address underwriting risks”. It added: “The insurance industry, however, could also experience increased demand for new services and play a crucial role in closing existing protection gaps.”

On the macroeconomic side, EIOPA said the COVID-19 pandemic continues to pose a challenge to European economies. Uncertainties relating to the path of the pandemic and supply chain disruptions weigh on the growth outlook.

“Despite the recent pick-up in long-term yields, markets still operate in a low interest rate environment, which puts pressure in particular on life insurers and pension funds.”

EIOPA warned that were inflation to persist, it could prove to be a significant source of risk for non-life insurance, negatively affecting their profitability through the potential coverage of claims in real terms.

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