European insurance companies are more exposed to financial risk than at the beginning of 2011, a report showed today.
In it’s twice yearly report on financial stability in the insurance and occupational pension fund sectors, the European Insurance and Occupational Pensions Authority (EIOPA) found that risks in the sector “are at high levels, and are more pronounced than the first half of 2011.”
Exposure to sovereign and banking debt as well as the macroeconomic outlook were the two main driving factors of the weakening, EIOPA said.
The watchdog also reported poor results on ‘stress tests’ which it conducted on the sector.
The tests were conducted using two different interest rate scenarios. Eight insurance companies failed the first scenario and four firms failed the second one, the watchdog said.
EIOPA reported that the solvency position of the industry on average would be “adversely affected” by a prolonged period of low yields.
Significant natural catastrophes over the past year had let to “above-average losses” for insurers, it explained.
Summing up, EIOPA said that while the financial turmoil has had an impact on pension funds and insurance, it has in not affected them as severely as some other financial industries.
