Italian insurers at risk from concentration in BTPs, IMF warns

Written by Adam Cadle

24/03/2020

An upward shift of 100bps in the yield of Italian sovereign debt would reduce the value of insurance companies’ own funds by 28%, the IMF has said.

In its latest report on the Italian financial sector, the IMF said: “The key risk to Italy’s insurance sector is sovereign risk arising from a concentration of investments in government bonds.

“Life insurers hold about 55% of their investment portfolio on sovereign debt. While the insurance sector seems broadly resilient to shocks, supported by adequate buffers, IVASS estimates point to the sensitivity of the sector to increases in the yield of Italian sovereign debt.”

The Italian insurance sector is the fourth largest in Europe and the eighth largest in the world by premium income. The industry has consolidated significantly in the past decade through mergers and takeovers, reducing the number of insurers from 162 in 2007 to 100 as of June 2018.

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