EU insurers act as contrarian traders when mutual funds experience outflows, EIOPA states

Written by Adam Cadle

25/06/2025

European insurers play an important stabilising role by acting as contrarian traders when mutual funds are experiencing large outflows, EIOPA has revealed.

EIOPA’s second occasional research paper of 2025 explores the extent to which insurers domiciled in the European Economic Area (EEA) step in to buy shares in mutual funds when other investors are selling their stakes.

“By analysing security-level regulatory data and fund-level information on net inflows, the study provides valuable insights into the investment patterns of insurers,” EIOPA said. “The focus on open-ended mutual funds is particularly relevant given that some of these funds may be susceptible to liquidity crises.”

The study showed that a significant proportion of such purchases by insurers is concentrated in funds that are affiliated with them. As a result, insurance-backed funds in the sample showed lower volatility and a lower flow-performance sensitivity than their peers. Further, the research found that the extent to which insurers provide inflows is closely tied to their own financial health, with better-capitalised entities more likely to provide backstops than entities that are less well-capitalised.

“By acting as contrarian traders, particularly to affiliated funds, insurers help mitigate the impact of potential investor runs and enhance market resilience,” the paper stated.

“Secondly, the contrarian trading of insurers may prove more modest in times of severe systemic stress when insurers’ own financial health comes under pressure. The loss of this stabilising force could leave mutual funds more vulnerable to panic-induced withdrawals and exacerbate financial turbulences.”

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