EIOPA PUBLISHES ITS 2013 HALF-YEAR FINANCIAL STABILITY REPORT

The European Insurance and Occupational Pensions Authority (EIOPA)
published today its first half-year report for 2013 on the financial
stability of the insurance and institutions for occupational retirement
provision (IORPs) sectors in the European Economic Area (EEA).

EIOPA observes that the insurance and occupational pensions sectors are
exposed to the risks of financial markets reversals, the impact of low
interest rates and the weak economic fundamentals and outlook that
characterise the risks to financial stability in the EU more generally.

In the life insurance sector, low GDP growth and high unemployment continue
to weigh negatively on premium growth, while non-life insurers report
positive premium growth rates mainly due to mandatory insurance purchases.

In line with EIOPA's call, insurers and supervisors have been responding
to the risk of a prolonged period of low interest rates. Some insurance
companies have started to shift away from fixed and/or life-long
guarantees toward less rigid guarantees in order to reduce reinvestment
risk. Others are making a strategic shift towards other non-guaranteed
product types. Supervisors continue to engage with firms and to perform
targeted exercises aimed at identifying vulnerabilities and appropriate
supervisory tools.

In the reinsurance market, underwriting capacity continues to outgrow
demand. Reinsurance undertakings showed a good operating performance
benefiting from a capital inflow to the sector with investors looking for
stable returns in volatile markets. Losses from natural catastrophes
remained significantly lower in 2012 than in 2011 and 2005, the worst
years ever for the reinsurance industry. So far in 2013, the costliest
events in Europe have been the series of earthquakes in Italy´s Emilia
Romagna region in May. In addition, a hard winter season affected some
European countries which experienced heavy snowfall, high winds, ice and
flooding. The wintry weather caused economic losses estimated about 1.4bn
euros. The more recent flooding in Europe will also generate significant
losses, but it is too early to have firm estimates on their scale.

In the occupational pensions sector, the shift from defined benefit schemes
towards defined contribution or hybrid schemes continued. This rebalancing
reflects a range of factors, including a response to changes in longevity,
regulatory changes and developments in the tax treatment of pension
schemes in some jurisdictions.

The text of EIOPA 1st half-year Financial Stability Report 2013 can be
found here (Link:
https://eiopa.europa.eu/publications/financial-stability/index.html ).


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