Risk landscape stable for European insurers despite market risks remaining key concern

Written by Adam Cadle

31/01/2025

Risks in the European insurance sector are stable and overall at medium levels, with pockets of vulnerabilities stemming from market volatility and shifts in real estate prices, EIOPA’s January 2025 Insurance Risk Dashboard has revealed.

Macroeconomic risks remain stable at a medium level, with GDP growth and inflation forecasts holding steady. Geopolitical tensions are reshaping global dynamics, heightening concerns about declining international cooperation, and escalating risks and uncertainties in the years to come.

Market risks remain at a high level. While bond volatility stabilised, it remains above historical standards.

Liquidity and funding risks are at a medium level but with an upward trend due to a gradual increase of risks across various indicators over the last year and the worsening of funding conditions in Q4 2024.

Solvency and profitability risks are unchanged at a medium level. Solvency ratios for insurance groups and solo undertakings in the non-life segment showed a slight improvement in Q3 2024 while remaining largely unchanged for life undertakings.

Credit risk, insurance risks, market perceptions as well as interlinkages and imbalances risks are all assessed at medium levels.

Concerning ESG related risks, the outlook for the next 12 months is pointing to an increase in risks as growing scepticism and evolving dynamics in environmental agreements make it more challenging to ensure consistent progress towards long-term sustainability goals.

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