Insurance Europe responded to EIOPA's draft Opinion on AI governance in insurance, supporting clarity on existing rules but raising concerns over potential new obligations. It cautioned that the draft's language might lead to supervisory expectations being misinterpreted as binding requirements, conflicting with the EU's simplification goals for smaller firms. Insurance Europe also highlighted risks of dual supervision in some regions and emphasized the need for clear distinctions between different AI types and user roles. It urged EIOPA to focus on aligning the Opinion with established frameworks like Solvency II and GDPR for effective oversight.
“The European Insurance and Occupational Pensions Authority (EIOPA) has published the technical information on the symmetric adjustment of the equity capital charge for Solvency II with reference to the end of April 2025.”
EIOPA's April 2025 Insurance Risk Dashboard indicates stable, medium-level risks in the European insurance sector, though pockets of vulnerability exist due to geopolitical uncertainty and market volatility. Macroeconomic risks are stable but with concerning GDP growth and inflation forecasts. Credit risks remained stable until early April, when spreads widened slightly. Market risks are elevated due to bond and equity volatility. Liquidity, solvency, profitability, financial interlinkages, and insurance risks are stable. Market sentiment is medium risk, and ESG risks are steady but with an intensifying outlook due to shifting environmental agreements.
FERMA supports the EIOPA and ECB's proposal for a European public-private reinsurance scheme to address the natural catastrophe protection gap. While backing the risk-based premium model and the potential for price stability, FERMA emphasizes the need for reliable and consistent data collection across nations. They also highlight the importance of a sufficiently large EU pool to manage premium pricing, a clear regulatory framework avoiding unnecessary burdens, and mechanisms to encourage long-term private sector engagement beyond annual renewals. FERMA advocates for continuous consultation and leveraging the scheme to incentivize risk prevention.
In 2024, the Joint Committee remained key in analyzing cross-sectoral financial risks, publishing joint risk reports in spring and autumn. The spring report warned of elevated risks from weak growth, uncertain rates, and geopolitical tensions, with concerns over rising credit risk and potential market corrections. The autumn report emphasized ongoing economic uncertainty, market volatility, and the effects of high interest rates. It highlighted inflation risks, operational and cyber threats, and included a detailed focus on credit risk, urging financial institutions to maintain strong risk management, provisioning, and adaptability in facing evolving challenges.
EIOPA advocates for smarter, harmonized EU regulation and stronger supervision to simplify rules and reduce administrative burdens, boosting European competitiveness. This balanced approach aims to create a thriving Single Market while protecting consumers and ensuring financial stability. EIOPA has already taken steps in this direction and emphasizes that simplification should prioritize EU interests and avoid creating new national burdens.
The ESAs Spring 2025 update highlights geopolitical tensions and cyber risks as major threats to EU financial stability. Trade disputes, policy shifts, conflicts, and economic fragmentation demand increased vigilance. Financial institutions face uncertainties in international markets, liquidity, and AI's role. Proactive risk management, cyber resilience, and monitoring global linkages are crucial.
EIOPA highlights the lack of consistent regulatory treatment for crypto assets in the (re)insurance sector, raising concerns about risk sensitivity. Current capital weight options may underestimate crypto risks. To ensure prudence, EIOPA proposes a uniform 100% capital requirement for all crypto holdings. This approach balances risk management with simplicity while acknowledging that future market growth may require revisions. A review of crypto treatment under Solvency II is recommended as the sector evolves.
EIOPA issued guidance to harmonize supervisory approaches to insurers’ foreseeable dividend deductions. It acknowledges different methods—annual full deduction, quarterly accrued, and post-approval deduction. While supporting the quarterly approach, EIOPA sees annual full deduction as viable in stable environments. The guidance aims to enhance supervisory convergence amid the Solvency II review.