The European Insurance and Occupational Pensions Authority (EIOPA) published today its July 2025 Insurance Risk Dashboard based on Q1 2025 Solvency II data and Q2 2025 market data. The main findings show that risks in the European insurance sector are stable at a medium level. However, some areas have a negative outlook for the next 12 months, marked by geopolitical tensions, uncertain trade dynamics, and market volatility.
The macroeconomic risks remain at medium level, even though lower inflation forecasts have coincided with modest downward revisions in global GDP. A temporary pause in tariff escalation and ongoing trade negotiations have offered partial relief, but uncertainty persists. Declines in long-term interest rates and monetary policy rates, coupled with slight fiscal deterioration across major economies, have done little to improve the overall risk sentiment. The recent conflict escalation in the Middle East and unclear trade outcomes continue to weigh on the outlook.
Credit risks remain stable, with minimal movements in risk premia and largely unchanged insurer investment allocations. Credit quality remains high, and household debt registered a slight drop in the euro area.
Market risks, however, continue to be a cause for concern, particularly due to persistent volatility in fixed income markets and a potential disconnect between equity valuations and underlying fundamentals. Insurers’ asset exposures have remained broadly stable, while commercial real estate values continue to lag behind the recovery seen in residential properties.
Liquidity and funding risks are also stable, but reflect mixed signals. While cash flow sustainability has improved, a deterioration in liquid asset ratios and persistently high lapse rates remain potential vulnerabilities.
Solvency and profitability indicators held up in early 2025, with strong capitalisation across the sector. While returns on assets and premiums improved, other profitability metrics saw slight declines. Non-life underwriting results strengthened, while life investment returns were stable.
Financial interlinkages risks remain largely unchanged. Insurers’ exposures to banks, sovereign debt, and financial markets are steady, though the share of premiums ceded to reinsurers has slightly increased.
Insurance-specific risks are stable at medium level, supported by robust year-on-year premium growth in life and non-life business lines and an improved loss ratio in Q1 2025.
Market sentiment remains cautiously optimistic with the sector being perceived as relatively safe during recent market turbulence. While life insurance stocks underperformed, non-life insurers posted stronger results. Credit Default Swap spreads narrowed, though elevated valuations and geopolitical risks could still trigger repricing in the near term.
ESG risks are stable, though trending upward. Exposure to green bonds increased, while their holdings of broader climate-relevant assets slightly declined. Physical climate risks, particularly windstorms, remained constant.
Cyber and digitalisation risks are gaining prominence, with an increased perceived likelihood of incidents and growing concerns around IT system vulnerabilities.
The insurance sector has shown notable overall resilience, but close monitoring and continued vigilance are necessary as geopolitical, market and operational risks continue to evolve.
Background
This Insurance Risk Dashboard, based on Solvency II data, summarises the main risks and vulnerabilities in the European insurance sector through a set of risk indicators from the first quarter of 2025 and end-2024. The data is based on financial stability and prudential reporting collected from 96 insurance groups and 2116 solo insurance undertakings. The Solvency II information is complemented with market data with cut-off date end-June 2025.
