On 8 December, EIOPA published its December 2016 Financial Stability Report on the (re)insurance and occupational pensions sectors of the EEA. The report states that the prolonged low interest rate environment and several geopolitical risks mean that the European macroeconomic environment remains fragile and challenging for insurers. These risks for insurers include exposure to reinvestment risk, exposure to risks coming from the European banking sector and cyber risks. However, the report notes that digitalisation offers new opportunities to insurers to develop new products.
The report notes certain trends including that insurers have been moving their business model towards unit-linked investments and that they have been reinvesting maturing assets in the current yield environment in order to match the cash flow profiles of outstanding liabilities.
Reinsurers are under profitability pressure from low investment returns, benign catastrophe activity and continuing capital-inflow into the reinsurance market.
Also contained in the report are two thematic articles entitled "The Impact of the Monetary Policy Interventions on the Insurance Industry" and "Updating the Long Term Rate in Time: A Possible Approach".
A link to the report is here.