EIOPA sees higher risk from cyber and digital

The European Insurance and Occupational Pensions Authority (EIOPA) sees an increased risk from cyber threats and digitalisation in its latest Risk Dashboard – based on Solvency II data from the fourth quarter of 2021.

Digitalisation and cyber risks rose to a high level, according to EIOPA.

It said that the materiality of these risks for insurance as assessed by supervisors increased given the resurgence of cyber security issues and concerns of a hybrid geopolitical conflict. Cyber negative sentiment indicates a mounting concern in the first quarter of 2022, while the frequency of cyber incidents impacting all sectors of activity, as measured by publicly available data, has increased significantly since the same quarter of last year.

With regard to macro risks, forecasted GDP growth at global level decreased while inflation forecasts for main geographical areas show an upward trend, reflecting the ongoing Russian invasion of Ukraine and subsequent further increases in energy prices.

Credit risks have not changed significantly and remain relatively moderate, even though CDS spreads for financial unsecured and non-financial corporate bonds increased in the first quarter of 2022.

EIOPA said that the median investment in bonds and loans has not changed in the last quarter of 2021, while market risks overall did not increase compared to the previous assessment, notwithstanding the significant impact of Russia’s invasion of Ukraine. Volatility in the bond market and the equity market increased in the first quarter of 2022 reflecting uncertainties related to the geopolitical situation.

Profitability and solvency risks remain at medium levels, it added, noting that groups’ solvency position improved, while the SCR ratio for solo life and non-life undertakings slightly dropped. Return on excess of assets over liabilities and return on assets both decreased but remain above the 2020 levels.

Interlinkages and imbalances risks remain at a medium level with insurance groups’ exposure to insurances reporting a drop. The median investments in other financial institutions went up.

EIPOA said that Environmental, social and governance (ESG) related risks are at a medium level. The median growth of insurers’ investment in green bonds has slightly increased. The year-on-year growth in the amount of outstanding green bonds has also been volatile and it increased in the last quarter. The catastrophe loss ratio slightly decreased compared to the previous quarter.

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