Sovereign risk is the biggest source of concern for insurers regarding financial stability, according to the sector’s Euro-regulator.
The European Insurance and Occupational Pension Agency’s latest financial stability snapshot, published today, says that the level of risk to the European insurance industry has not changed substantially since its last report at the end of 2010.
But the report adds that, as of April this year, risk levels remain high.
It says premiums have started to increase and profits tend to be higher, albeit at a still modest level.
In addition, insurance undertakings’ solvency margins have again built up shock absorption capacity for future stress events.
EIOPA believes that the sector is well suited to cope with possible longer-lasting low interest rate environment.
It also says that despite a year of significant natural catastrophes in 2010, reinsurers were able to restore its balance sheets and accumulate capital.
The report is due to be discussed at the next meeting of the European Systemic Risk Board General Board on the macro-financial conditions and overall stability of the EU financial system.
The report covers developments in the insurance, reinsurance and occupational pension fund markets as of April 2011.
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