January 31, 2019

EIOPA published its updated risk dashboard based on data for the third quarter of 2018. This data is based on financial stability and prudential reporting collected from 96 insurance groups and 2,906 solo insurance undertakings. The risk dashboard is based on Solvency II data and it summarizes the main risks and vulnerabilities in the insurance sector in EU through a set of risk indicators. The results of the third quarter 2018 show that, overall, the risk exposure of the EU insurance sector remains stable.

The dashboard highlights that credit, market, and liquidity and funding risks continue at a medium level, with Credit Default Swap spreads for corporate bonds as well as equity market volatility increasing since September. Profitability and solvency risks also remain stable at a medium level. The ratio of assets over liabilities and share of tier 1 own funds have both increased slightly. Median Solvency Capital Requirement (SCR) ratios for groups and non-life companies have improved while the SCR ratios for life companies have decreased. However, SCR ratios for all types of undertakings remain above 100%. Although insurance risks increased following the impact on (re)insurers' loss ratios of the natural catastrophes observed in the third quarter of 2018, they remain at a low level. Underpricing and underreserving driven by the competition could be a concern for some lines of business. Market perceptions are stable at the medium level, with insurance stocks outperforming the market despite a general deterioration in equity market performance. 

 

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Keywords: Europe, EU, Insurance, Risk Dashboard, Financial Stability, Solvency II, Credit Risk, Market Risk, Liquidity Risk, EIOPA