Financial Stability Report December 2024

EIOPA FINANCIAL STABILITY REPORT December 2024 EIOPA(2024)0103269 Risk & Financial Stability Department EIOPA REGULAR USE EIOPA-BoS-24-516 12 December 2024 CONTENTS FOREWORD BY THE CHAIRPERSON 4 KEY DEVELOPMENTS AND RISKS 7 TOPICAL FOCUSES 12 EEA insurers’ and IORPs’ real estate related investments: Trends and vulnerabilities 13 Introduction 13 Trends and overview of EEA insurers’ real estate related investments 16 Activity on real estate investments during the recent downturn 21 Rent-income to total income and property holdings valuations 23 Vulnerabilities: Impact on capital positions via sensitivity analysis 25 Conclusions 28 Asset intensive (or Funded) reinsurance 29 Introduction 29 What is asset intensive Reinsurance (AIR)? 30 Factors driving use of asset intensive Reinsurance (AIR) 31 Exposure of european (re)insurers to cross-border AIR 33 Risks to european (re)insurers from cross-border AIR 34 Conclusions and next steps 35 Assessment of systemic risk in the EEA insurance sector 36 Introduction and motivation 36 Methodological aspects 37 Overview of 2024 risk assessment 39 Economic environment 39 Interconnectedness – Macroeconomic Exposure 40 Interconnectedness – Counterparty Exposure 41 Asset Liquidation and Policyholder Behaviour 41 Substitutability 42 Underwriting and Solvency 43 Emerging Risks – ESG 44 Emerging Risks – Digitalisation and Cyber Risks 45 Conclusion 45 A.1. Results of the...