EIOPA emphasizes that the pandemic crisis is still not over and many uncertainties remain despite the progress in vaccination campaigns and decreasing trends in the number of new infections. The impact on the real economy was reduced by extensive fiscal measures, but some negative effects might become visible only when the introduced measures will phase out. In particular, increased unemployment and corporate credit downgrades would have a negative impact on both the insurance and pension sectors.
While the EU economy is still subject to high risks, some lessons learned have already been reflected in the Solvency II review by taking into account the changes in the current economic environment. The ongoing crisis also highlighted the critical importance of coordinated approaches among the national competent authorities. It is also essential to keep the focus on new emerging risks such as cyber and climate risks. Environmental, social, and governance factors that increasingly shape investment decisions of insurers and pension funds and affect their underwriting, remain one of the focal points for the insurance and pension industry.
There is a need to continuously analyse all risks. In this respect, EIOPA is currently running an EU-wide insurance stress test exercise assessing the impact of an adverse COVID-19 scenario in a “lower for longer” interest rate environment on both capital and liquidity positions of insurers.