Risk exposures for European insurance sector stable; macro/micro risks continue at high level

Written by Adam Cadle

2810/2019

Risk exposures for the European insurance sector have remained broadly stable for October, but macro and market risks continue at a high level, according to EIOPA.

Downward revisions to GDP growth and inflation forecasts and declines in swap rates for major currencies are adding further pressure to the sector. Volatility of the largest asset class – bonds – increased since July.

Credit risks have continued at a medium level, with somewhat lower CDS spreads for most bond segments and broadly stable credit quality of asset portfolios. Nonetheless, signs of potential risk mispricing prevail.

Profitability and solvency risks are also at a medium level. Half-yearly profitability indicators improved compared to Q2 2018 due to higher profit and loss figures reported by some insurance groups. SCR ratios for life undertakings declined.

Interlinkages and imbalances show a decreasing trend due to a lower share of premiums ceded to reinsurers in Q2, but remain at a medium level. Market perceptions were marked by an underperformance of insurers’ stocks compared to overall equity markets, whereas no change was observed in insurers’ external ratings.

Related Articles