Market risks main concern for European insurers; green bond investment steady

Written by Adam Cadle

05/02/2024

European insurers' exposure to market risk is currently at a high level and the main concern for the sector, with ESG risks remaining at a medium level, EIOPA’s latest Insurance Risk Dashboard has revealed.

Market risks remain prominent given the elevated volatility in bond markets and a further decrease in commercial real estate prices. While macro risks persist in the insurance sector, there is a declining trend, primarily due to a reduction in forecasted inflation. Credit risks remain at a medium level with no indication of significant changes.

Insurers’ median exposure towards climate-relevant assets hovers around 3.3% of total assets, while their investments in green bonds are steady at around 7% of total green bonds outstanding, the dashboard showed.

EIOPA said liquidity and funding risks remain at medium levels with an increasing trend driven in part by low catastrophe bond issuance in Q3 2023. Profitability and solvency risks are at medium levels also. The median SCR ratio for non-life undertakings showed an increase compared to the previous quarter, while the distribution for life undertakings remained largely unchanged.

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