European insurers well capitalised but ‘vulnerable’
Eiopa reports that renewed turmoil in Europe could affect even the largest insurers in the region.
Most European insurance companies are well-capitalised according to Solvency I standards, research from the European Insurance and Occupational Pensions Authority suggests.
Eiopa’s latest biannual report on the financial stability for the insurance and institutions for occupational retirement provision sectors in the European economic area looked at the 20 largest European insurance groups and found that by the end of 2011 they were capitalised by an average of 200 per cent of required levels.
However, their capitalisation and profitability are now experiencing a slightly downward turn.
The report suggests the insurance sector remains vulnerable to possible long-lasting low interest rates, although the sector would be able to cope with the challenge “for some time”.
This could quickly change however in the event of renewed turmoil, failure of governments to stabilise their fiscal situations or a disruptive unwinding of currency risk.
The report said: “While the first order effects of such events seem to be limited and are likely to hit only local insurers, the second order effects might hit bigger European insurers.”
In the institutions for occupational retirement provision sector, a trend towards defined contribution schemes continues.
At the same time there is a grave evolution in the funding positions of IORPs, especially for such countries where defined benefit schemes are already very widespread. In those countries, most notably the UK and the Netherlands, recovery programmes are run by the respective regulators, Eiopa said.