European insurers and occupational pension funds face mounting financial stability risks from private credit exposures, the European Insurance and Occupational Pensions Authority (EIOPA) has warned in its latest Financial Stability Report.
The European supervisory authority singled out private markets as a key vulnerability, citing concerns around liquidity, valuation uncertainty and concentration.
According to the report, insurers hold €514bn in private debt, while occupational pension schemes (IORPs) are exposed to €128bn. EIOPA noted that these allocations, while popular for their yield potential, carry structural risks that could be amplified in a volatile macroeconomic environment.
“Private credit, if not carefully managed, represents a growing source of systemic vulnerability,” the report stated.
The report also highlighted foreign exchange risk, particularly from a weakening US dollar, which could affect euro-denominated portfolios. Insurers and IORPs with large US exposures may face valuation pressures, while hedging practices differ across sectors, leaving some portfolios more vulnerable.
EIOPA further pointed to cross-border exposures to non-EEA markets, including the UK, US and major reinsurance hubs such as Bermuda and Switzerland. The authority emphasised that interconnectedness through ceded reinsurance and overseas investments could act as a contagion channel in the event of market stress.
While the report stresses that European insurers and pension funds remain broadly resilient, EIOPA warned that elevated uncertainty, subdued growth and ongoing geopolitical tensions heighten the potential for shocks to materialise.
Supervisory attention is likely to increase on private market allocations, with a focus on stress testing, liquidity management and governance.
Emerging risks such as cyber threats and the operational impact of artificial intelligence also received attention, reflecting a broader approach to financial stability beyond traditional balance-sheet metrics. EIOPA encouraged institutions to integrate these considerations into risk frameworks and capital planning.
For asset owners and managers, EIOPA’s report signals a need to reassess exposures and hedging strategies in light of evolving market conditions.
The combination of private credit growth, currency volatility and global interconnectedness suggests that risk management and supervisory engagement will be key themes for 2026.
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