European insurance sector resilient but macro-related risks main concerns

Written by Adam Cadle

03/05/2022

The European insurance sector remains resilient, but macro-related risks are currently the main concern for the industry, remaining at a high level in current assessment reflecting the Russian invasion to Ukraine, EIOPA’s latest Risk dashboard has revealed.

Forecasted GDP growth at a global level decreased until Q4 2022 and inflation forecasts for main geographical areas show an upward trend, with an average above 5%. Market risks overall did not increase compared to the previous assessment, notwithstanding the significant impact of the Russian invasion of Ukraine. Volatility in the bond market and the equity market increased in the first quarter of 2022 reflecting uncertainties related to the geopolitical situation. The median insurers’ exposure to bonds, equity and property remained hovering around previous levels.

Profitability and solvency risks remain at a medium level. The 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.

Market perceptions remain at a medium level, with the life and non-life insurance sector underperforming the stock market and the median price-to-earnings ratio decreasing.

Climate risks are at a 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.

EIOPA said digitalisation and cyber risks increased to a 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.

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