The Committee of European Insurance and Occupational Pensions Supervisors (CEIOPS) has published its Spring financial stability report 2009.
The main issues covered in the report and its conclusions are:
- 2008 saw financial market turmoil reduce demand for life products; recessionary effects are expected to further reduce demand in 2009.
- The 2008 financial performance of most insurance undertakings was worse than that of 2007; further deterioration of the macroeconomic environment will make 2009 especially challenging.
- In 2008 many undertakings have increased their capital buffers in response to the deterioration of solvency positions.
- 2008 was the second most expensive year on record as a result of weather-related claims. The global reinsurance market continued to soften but demand for reinsurance capacity is increasing. Primary insurance undertakings' capital has been put under pressure by low and negative investment results.
- Of the risks and challenges faced by the insurance industry, the most important are considered to be financial, particularly low or decreasing interest rates and those related to depressed equity markets.
- The monoline sector remains under particular stress, with continued deterioration of structured credit markets, not least securities related to US sub-prime mortgages.
- While institutions for occupational retirement provision (IORPS) have not experienced some of the liquidity problems seen elsewhere, the financial turmoil has affected their role as institutional investors. Share price decreases and credit spread increases have put their investment portfolios under severe strain.
- Defined benefit and defined contribution pension plans have come under a lot of pressure because of both low interest rates and increased longevity risk. It is felt that financial education and awareness is becoming a crucial factor in enabling people to make informed choices regarding their pension provisions.
View Spring financial stability report 2009, 24 June 2009