The European Insurance and Occupational Pensions Authority published its second occasional research paper of 2025 examining how European Economic Area insurers invest in mutual funds experiencing large outflows. The paper finds insurers act as contrarian traders by stepping in to buy when other investors sell, which can dampen run dynamics in open-ended funds that may be vulnerable to liquidity stress. Using security-level regulatory data alongside fund-level net inflow information, the analysis shows a significant share of insurers’ purchases is concentrated in funds affiliated with them, and these insurance-backed funds exhibit lower volatility and lower flow-performance sensitivity than peers. The paper also links insurers’ willingness to provide inflows to their own financial health, with better-capitalised insurers more likely to act as backstops, and suggests this stabilising effect could weaken in severe systemic stress if insurers themselves come under pressure.
European Insurance and Occupational Pensions Authority 2025-06-25
European Insurance and Occupational Pensions Authority research finds EEA insurers stabilise mutual funds by buying during large outflows
The European Insurance and Occupational Pensions Authority released a paper analyzing how European Economic Area insurers invest in mutual funds with large outflows. The study reveals insurers act as contrarian traders, buying when others sell, helping mitigate liquidity stress in open-ended funds. It also highlights that insurers' financial health influences their ability to stabilize these funds, with better-capitalized insurers more likely to provide support.