Insurers’ exposures to macro and market risks are currently the main concern for the insurance sector, while all other risk categories are at medium levels, according to the European Insurance and Occupational Pensions Authority’s (EIOPA) Risk Dashboard.

This Risk Dashboard, based on Solvency II data, summarises the main risks and vulnerabilities in the European Union’s insurance sector through a set of risk indicators of the fourth quarter of 2022.

The data is based on financial stability and prudential reporting collected from 97 insurance groups and 2,181 solo insurance undertakings.

The analysis showed that risks related to the macroeconomic environment continue to be the most relevant for the insurance sector.

EIOPA risk dashboard

Market risks are high amid increased volatility in the bond and equity markets. Insurers’ relative exposure to bonds, equity and property nevertheless remains largely unchanged, EIOPA stated.

Liquidity and funding risks increased, the analysis showed, adding that insurers’ cash and liquid asset holdings dropped in the last quarter of 2022 while lapse rates have gone up.

Profitability and solvency risks remain at medium level, EIOPA said, with life insurers reporting an increase in their SCR ratio, while the same measure for non-life insurers experienced a slight decrease. Return on both assets and premiums rose, it added.

According to the dashboard, interlinkage and imbalance risks are also at medium level. Insurers continued realizing market-to-market losses on their interest rate hedging derivatives positions although to a lower extent than in the previous quarter. The sector’s exposure to banks and other financial institutions has increased, it said.

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