Upward trend in insurers’ total systemic risk scores, IAIS finds

Written by Adam Cadle

16/12/2022

Systemic risk in the global insurance sector on aggregate remains moderate, the International Association of Insurance Supervisors (IAIS) has said, however there is an upward trend in insurers’ total systemic risk scores, in particular, driven by increased exposures to illiquid, difficult-to-value assets, over-the-counter derivatives, short-term funding and intra-financial assets.

According to the IAIS 2022 Global Insurance Market Report (GIMAR), the increased exposures contribute to potential vulnerabilities for the insurance sector, notably in the face of increasing interest rates.

Insurers’ solvency and profitability positions improved on aggregate in the global insurance sector over the course of 2021, supported by strong performance in financial markets. The overall credit quality of insurers’ assets is high; however, the exposure to below investment grade assets has increased.

In terms of solvency measures, several insurers continued to buy back shares and/or redeem subordinated debt. Others issued capital and/or subordinated debt to strengthen capital and liquidity positions. Measures taken by insurers to preserve or improve profitability included optimising capital allocation and asset-liability management, realising gains on investments, digital transformation, diversifying product offerings and revenue sources, and optimising underwriting and pricing policies.

Related Articles