EIOPA Dashboard Examines Risks in Insurance Sector
EIOPA published the risk dashboard based on the Solvency II data from the third quarter of 2020. The dashboard uses a set of risk indicators to summarize key risks and vulnerabilities in the insurance sector in EU. The results show that insurers’ exposures to macro risks decreased from very high to high level, while all other risk categories remain at medium level. Going forward, European supervisors expect an increase in credit, market, and underwriting risks over the next 12 months, reflecting concerns over second lockdowns due to the new waves of the pandemic as well as potential cliff effects once fiscal support measures cease to apply.
In addition, the Solvency Capital Requirements (SCR) ratio for insurance group undertakings slightly improved from the second quarter 2020 to the third quarter of 2020, although remaining at lower levels than in the last quarter of 2019. Profitability and solvency risks, along with the liquidity and funding risks, remain at medium level. The results also show that financial markets positively reacted to the COVID-19 vaccine news in the second half of 2020, with market and credit risk indicators stabilizing. However, the potential disconnect between the market performance and the economic outlook remains a concern, as it could result in sharp valuation adjustments. The credit-worthiness of assets in insurers’ portfolios is under close monitoring. Looking ahead, an increasing trend for market and credit risks is expected over the next 12 months due to the high uncertainty and the concerns related to decoupling between financial market performance and economic outlook.
Related Links
Keywords: Europe, EU, Insurance, Risk Dashboard, Credit Risk, Market Risk, SCR, Solvency II, Liquidity Risk, EIOPA
Featured Experts
Adam Koursaris
Asset and liability management expert; capable modeler; risk and capital specialist
Cassandra Hannibal
Life insurance actuary; risk management and economic capital specialist
Karen Moss
Senior practitioner in asset and liability management (ALM) and liquidity risk who assists banking clients in advancing their treasury and balance sheet management objectives
Previous Article
DFSA Issues Guidance on Capital Adequacy and Solvency RequirementsRelated Articles
HKMA Finalizes Policy Modules on Group-Wide Approach and Remuneration
The Hong Kong Monetary Authority (HKMA) revised the Supervisory Policy Manual module CG-5 that sets out guidelines on a sound remuneration system for authorized institutions.
EBA Guide to Monitor Threshold for Intermediate Parent Undertakings
The European Banking Authority (EBA) published the final guidelines on the monitoring of the threshold and other procedural aspects on the establishment of intermediate parent undertakings in European Union (EU), as laid down in the Capital Requirements Directive (CRD).
PRA Finalizes Approach to Supervision of International Banks
In a recent Market Notice, the Bank of England (BoE) confirmed that green gilts will have equivalent eligibility to existing gilts in its market operations.
FCA Issues PS21/9 on Implementation of Investment Firms Regime
The Financial Conduct Authority (FCA) published the policy statement PS21/9 on implementation of the Investment Firms Prudential Regime.
EBA Proposes Regulatory Standards to Identify Shadow Banking Entities
The European Banking Authority (EBA) proposed regulatory technical standards that set out criteria for identifying shadow banking entities for the purpose of reporting large exposures.
IOSCO Proposes Recommendations on ESG Ratings and Data Providers
The Board of the International Organization of Securities Commissions (IOSCO) proposed a set of recommendations on the environmental, social, and governance (ESG) ratings and data providers.
ESMA Group Issues Recommendations on RFR Switch in Interdealer Market
The European Securities and Markets Authority (ESMA) published recommendations from the Working Group on Euro Risk-Free Rates (RFR) on the switch to risk-free rates in the interdealer market.
ECB Study Assesses Impact of Basel III Finalization Package
The European Central Bank (ECB) published a paper as well as an article in the July Macroprudential Bulletin, both of which offer insights on the assessment of the impact of Basel III finalization package on the euro area.
ISDA Finds FRTB Results in Higher Capital Charges for Carbon Trading
The International Swaps and Derivatives Association (ISDA) published a paper that explores the impact of the Fundamental Review of the Trading Book (FRTB) on the trading of carbon certificates.
PRA Updates Remuneration Policy Statement Templates and Tables
The Prudential Regulation Authority (PRA) published the remuneration policy self-assessment templates and tables on strengthening accountability.
