EIOPA’s financial stability report sees insurers and pension funds weathering a complex and uncertain risk landscape

The European Insurance and Occupational Pensions Authority (EIOPA) published today its December 2024 Financial Stability Report in which it assesses the risks and vulnerabilities facing European insurers and occupational pension funds in a challenging risk landscape marked by high uncertainties. In addition to providing an overview of recent developments, the report also features three topical analyses that are particularly relevant in the current context. These parts of the report examine institutional investors’ exposure to real estate, the rise of asset intensive (or funded) reinsurance, and the structure of EIOPA’s framework to assess systemic risk in the European insurance sector. Insurers and occupational pension funds, along with the rest of the world, are navigating a complex and highly uncertain geopolitical situation. Although the impact of global tensions on Europe's financial sectors has been limited so far, underlying risks seem to be building up. As a result, the financial system is vulnerable to unforeseen events that could trigger abrupt and far-reaching changes in macroeconomic conditions. Inflation has declined and is now hovering near the European Central Bank’s target of 2%. Interest rates have broadly decreased as well after central banks embarked on a series of rate cuts. That said, concerns are mounting regarding the European economy’s growth prospects. Both insurers are occupational pension funds are well-positioned to absorb potential shocks....