The European Insurance and Occupational Pensions Authority (EIOPA) published its June 2025 Financial Stability Report, finding Europe’s insurance, reinsurance and occupational pensions sectors remain robust and well-capitalised in a volatile macroeconomic environment. It highlights the need for closer monitoring of risks tied to exchange-rate, interest-rate and equity-valuation volatility, as well as geopolitical exposures including cyber risk. Under Solvency II, the aggregate capital position stayed stable but solvency ratios declined versus end-2023, with the median Solvency Capital Requirement (SCR) ratio for life insurers at 230% at year-end 2024 (246% in Q4 2023) and median SCR ratios of 216% for composite, 214% for non-life and 223% for reinsurance undertakings (from 225%, 217% and 235% the previous year). Non-life premiums grew 8.2% year-on-year in 2024, while life gross written premiums rose 13.8% to EUR 758 billion and technical cash flows turned positive; profitability also improved, with median return on assets at 0.7% (0.6% the previous year) and a proxy for return on equity rising to 9.3% (from 8.0%). Reinsurers ended 2024 with a median solvency ratio of 235% (223% in 2023), while institutions for occupational retirement provision (IORPs) saw assets grow faster than liabilities and a slight improvement in financial position. The report points to heightened uncertainty around international collaboration and trade barriers, alongside elevated long-term interest rates and repricing of spreads linked to expected tariff impacts, and notes a spring 2025 weakening of the US dollar versus a basket including the euro and a March spike in European rates following a major German defence and infrastructure spending package. It also describes cyber risk as material, with network interruption and cyber extortion the most frequent attack types, and notes continued pressure from natural catastrophes. (Re)insurers and IORPs’ use of derivatives to hedge interest-rate and currency risks can create offsetting or amplifying margin calls, while portfolios remain concentrated in fixed income with equities at 21.7% of insurers’ investments and notable exposures to US assets across both insurers and IORPs, leaving them vulnerable to indirect effects of trade disruption.
European Insurance and Occupational Pensions Authority 2025-06-19
European Insurance and Occupational Pensions Authority Financial Stability Report finds insurers and IORPs remain well-capitalised amid heightened market and geopolitical risks
The European Insurance and Occupational Pensions Authority's June 2025 Financial Stability Report confirms the robustness of Europe's insurance, reinsurance, and occupational pensions sectors despite a volatile macroeconomic environment. It highlights the need for closer monitoring of exchange-rate, interest-rate, and equity-valuation volatility, as well as geopolitical and cyber risks. The report notes a decline in solvency ratios under Solvency II, growth in non-life and life premiums, and improved profitability, while emphasizing vulnerabilities due to concentrated fixed-income portfolios and exposure to US assets.