EIOPA's risk assessment of the EU insurance industry

EIOPA's risk assessment of the EU insurance industry

EIOPA released its risk dashboard on 28 February. The dashboard considers a series of risk categories.

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EIOPA released its risk dashboard on 28 February.  The dashboard considers a series of risk categories - macro risk, credit risk, market risk, liquidity and funding risk, profitability and solvency risk, risks resulting from interlinkages and imbalances, insurance (underwriting) risk and market perceptions – and identifies whether the risk is perceived to be growing or diminishing.

There are no significant changes from the previous risk dashboard released in March 2016 and no surprises.  The high risk categories are macro risk and market risk; insurance risk is the only risk category graded low with everything else graded medium.  All of the risks are shown as being “constant” with the exception of liquidity and funding risk, due to a decrease in the catastrophe bonds issuance indicator.

The findings are no real surprise and consistent with the stress test results released in December.  The macro-economic environment remains fragile and the low-yield environment continues to be a major challenge for insurers.  In addition, it is unclear that the political uncertainty (including European elections and Brexit) has been fully factored into financial markets. 

Importantly, EIOPA notes that market perception of the insurance industry is fairly stable, with no major market reaction to the transition to Solvency II.

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