European insurers now investing large part of portfolio in European assets

Written by Adam Cadle

27/06/2024

European insurers are now investing a large part of their portfolio in European assets, with 87% of their sovereign bond investments, 80% of their equity holdings and 75% of their corporate bond investments going towards European states and companies, EIOPA’s latest Financial Stability Report has shown.

The overall portfolio is heavily skewed towards fixed income assets like government and corporate bonds, however, a significant part (16%) of their investments is in alternative assets, with real estate investments and private debt-related investments as the largest exposures.

Insurers allocate 5.7% of their investments to real estate through investment funds, mortgages and property. Private debt makes up 2.6% of their total investments while 1.9% is allocated to private equity.

The Financial Stability Report said Europe’s insurance and occupational pensions sectors have remained robust on aggregate, despite widespread challenges. It said that the insurance sector is solidly capitalised and median SCR ratios for life insurers and composite undertakings have improved throughout the shift from low to higher interest rates, as have profitability levels. Gross written premiums in the non-life sector continued to grow while the life business saw a more moderate increase.

Insurers’ liquid assets ratio has remained stable over the past years although there is considerable variation across countries. Lapse rates in the life business are fairly stable, though there are some signs of vulnerability, it added.

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