EIOPA published the updated risk dashboard for the third quarter of 2019. This risk dashboard, which is based on Solvency II data, summarizes the main risks and vulnerabilities in the insurance sector in EU through a set of risk indicators of the third quarter of 2019. It is based on financial stability and prudential reporting data collected from 96 insurance groups and 2,843 solo insurance undertakings. Overall, the risk assessment shows that the risk exposures of the insurance sector in EU remained stable. Market risks are high while the credit risks, liquidity and funding risks, profitability and solvency, and insurance underwriting risks remain at the medium level.
The assessment shows that prolonged low interest rates challenge the insurance sector. Market risks, while remaining at a high level, show a decreasing trend due to lower implied bond market volatility since October. Credit Default Swap spreads declined slightly across most bond segments, except sovereign bonds, with credit risks remaining at medium level. Solvency ratios for groups and life undertakings declined across the whole distribution in the third quarter of 2019, but profitability and solvency risks still continue at the medium level. Interlinkages and imbalances show an increasing trend due to higher Solvency II values reported mainly for the largest derivative exposure—interest rate swaps. This could possibly be related to the Asset and Liability Management, or ALM, strategies in response to low interest rates. Market perceptions remain at medium level, with life insurance stock prices outperforming the overall market and non-life stocks under-performing.
Keywords: Europe, EU, Insurance, Risk Dashboard, Solvency II, Market Risk, Credit Default Swap, ALM, Credit Risk, EIOPA
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