CEIOPS publishes its bi-annual report on the financial conditions and financial stability of the insurance sector

CEIOPS' publishes today its second bi-annual report on the financial conditions and financial stability of the insurance and occupational pension fund sector in the EU/EEA. The report covers developments in the (re)insurance and occupational pension fund markets for the periods 2007 and 2008. Furthermore, observations and an outlook for 2009 and beyond are also provided. CEIOPS has found that in 2008 the financial performance of most insurance undertakings was below that of the previous year due to low investment yields and flat or decreased premium income while solvency positions deteriorated. In response, many undertakings have been able to increase their capital buffers.The insurance industry as a whole continues to face a number of risks and challenges going forward, of which the most prevalent are financial risks, in particular the risk of low or even again decreasing interest rates as well as risks related to depressed equity markets. A prolonged period of economic recession would be particularly challenging for the underwriting performance.CEIOPS also found that the financial turmoil has affected Institutions for Occupational Retirement Provisions (IORPs) primarily in their role as institutional investors. Although sharp drops in the equity markets and increasing credit spreads had put their investment portfolios under strain in 2008, the subsequent recovery of these markets has helped to mitigate the losses.However, the impact has not been as severe as seen in other financialsectors as the long term nature of the liabilities affords some protection in this respect and IORPs have not experienced the liquidity problems seen elsewhere. Policy responses from supervisors in light of the downturn have focused on the flexibilities within the current framework and the differing security mechanisms available.CEIOPS considers that most of the risks described in CEIOPS Spring Report 2009 have not significantly changed during the second half of 2009 and will continue to monitor their evolution and impact on the insurance and occupational pensions sector.Financial Stability Report 2009 (.pdf)