The European Insurance and Occupational Pensions Authority (EIOPA) has published its risk ‘dashboard’ for the first quarter of 2014. In summary, the report highlights that:

  • market risks remain a concern as deflationary tendencies continue across Europe with the result that policy interest rates remain low;
  • both unemployment and government debt remain high across the EU. Emerging geo-political risks and developments in global financial markets may have the potential to have a negative impact on European economic conditions;
  • insufficient implementation of structural reform in the Euro area may impact export growth;
  • liquidity and funding risks remain in the market as lapse rates have increased in some Member States. More illiquid assets are making their way into investment portfolios (i.e. commercial mortgages, private placement bonds, asset-backed securities);
  • credit risks have not reduced since the last quarter. Public and private indebtedness remains high;
  • the industry still faces challenges in terms of profitability as interest rates remain low;
  • contagion risks from banks and sovereign states remain an issue in the European market although rating outlooks for the Member States with large insurance groups are either stable or positive; and
  • insurance risk is not a major concern at present. Competition between reinsurers increases and is expected to have an effect on profitability and solvency.

View EIOPA Risk Dashboard June 2014 – Q1 2014 data, 25 June 2014