The European Insurance and Occupational Pensions Authority (EIOPA) has maintained a stable overall risk assessment for EU occupational pension funds, despite continued high market and asset return risk and a deteriorating liquidity position, according to its latest risk dashboard published on 31 July.
Based on Q1 2025 IORP reporting and Q2 2025 market data, EIOPA’s dashboard categorises the overall risk level for occupational pension funds as medium. However, it warned that the risk landscape remains fragile due to persistent geopolitical tensions and lingering macroeconomic uncertainty.
The dashboard identifies market and asset return risk as remaining at a high level, driven by increased volatility and uncertainty in financial markets. Equity markets showed mixed performance across the EU during the second quarter, with bond yields rising in several jurisdictions. EIOPA also noted a continuing decline in the funding ratios of defined benefit (DB) pension schemes in some member states.
Liquidity risk has worsened since the previous edition of the dashboard, particularly for IORPs using derivatives for hedging purposes.
Rising margin calls in volatile markets are adding pressure to liquidity buffers. This follows EIOPA’s earlier warning in July that some pension funds may lack robust frameworks for managing liquidity risk, particularly under stressed market conditions.
In its opinion on 10 July, the authority called on national supervisors to enhance scrutiny of liquidity risk management practices among IORPs, particularly where leverage or derivatives are used.
While credit risk remains stable at medium level, EIOPA highlighted marginal deterioration in bond ratings held by pension funds.
The macroeconomic environment also continues to exert pressure. Although inflation has eased compared to its 2023 peak, GDP growth across the euro area remains subdued, particularly in Germany and Italy.
EIOPA said that ESG-related risks and cyber risks continue to be monitored but remain at low levels for now. However, it urged IORPs to continue improving risk identification and resilience in these areas.
The regulator emphasised that despite the currently stable outlook, “vigilance remains warranted”, particularly as geopolitical risks – including tensions in Eastern Europe and the Middle East — could further unsettle markets in the coming months.
The next IORP risk dashboard is expected in Q4 2025.
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