EIOPA Dashboards Show Stable Risk Levels for Pensions & Insurers, But Outlook Darkens Amid Global Uncertainty

Key Takeaways

• IORPs Remain Stable But Volatile: Risks across European occupational pension funds (IORPs) remain at medium levels, though market volatility and macroeconomic uncertainty are beginning to apply pressure.
• Market and Liquidity Risks Rising: Elevated equity volatility, worsening derivative positions, and geopolitical tensions are driving a negative outlook for both pension and insurance markets.
• Macroeconomic Weakness Signals Trouble Ahead: GDP growth forecasts are down, inflation is softening, and wage growth is slowing, creating a fragile economic backdrop for both sectors.
• Cyber and ESG Risks Stay in Focus: Both dashboards highlight continued medium-level digitalization and cyber risks, with ESG exposures shifting—green bond holdings are up, but climate-relevant asset exposure is slipping.
• Insurance Sector Still Resilient, For Now: Capital positions remain strong, non-life underwriting has improved, and market sentiment is cautiously positive. But signs of strain are beginning to show, especially in commercial real estate and solvency metrics.

Deep Dive

The European Insurance and Occupational Pensions Authority (EIOPA) has published its July 2025 Risk Dashboards, and on the surface, risks across Europe’s occupational pension funds and insurance sector remain largely stable. But dig a little deeper, and a more nuanced picture emerges, one shaped by geopolitical tensions, market jitters, and persistent uncertainty.

Pensions: Calm Waters, But a Rising Undercurrent

According to the IORP Risk Dashboard, which draws on Q1 pension data and Q2 market indicators, risks across the occupational pension landscape remain at medium levels. But that doesn’t mean it’s all smooth sailing.

Market and asset return risks remain stubbornly high, driven by equity volatility and concerns that asset prices are drifting away from economic fundamentals. After a long slump, real estate prices across the Euro Area finally nudged upward, thanks mainly to the residential sector, but IORPs’ exposure remains modest, especially for smaller schemes.

Liquidity risks are beginning to trend upward, with derivatives dragging on balance sheets due to shifting interest rates. Still, many IORPs are sitting on a reasonably comfortable cash position for now, with inflows outpacing outflows.

On the macro front, the story is one of growing unease. Forecasts for GDP growth across major regions fell to 1.0% in Q2, while inflation edged down to 2.3%. Wage growth is slowing, unemployment is creeping up, and there’s a lingering sense that the global economy is treading water.

Credit risks, meanwhile, remain at a steady medium. Government bond spreads ticked up slightly, corporate bond spreads slipped, and overall credit quality across pension portfolios remains strong. Exposure to junk-rated assets is negligible for most.

Defined benefit schemes are in solid shape, thanks in part to higher interest rates that lowered liabilities more than they dented asset values. Funding ratios improved, giving these pensions some breathing room, at least for now.

Digitalization and cyber risks remain a medium-level concern, but their materiality is growing, fueled by the wider instability rippling across global affairs. ESG risks also stayed flat, though green bond investments continued their slow climb, signaling that sustainability remains on the radar.

Insurance: Strong Bones, But Cracks Are Forming

EIOPA’s Insurance Risk Dashboard tells a similar story of a sector that’s holding up well under pressure, but facing an increasingly stormy forecast.

Macroeconomic risks remain at a medium level, but the outlook is dimming. Growth and inflation forecasts are slipping, interest rates are trending downward, and public finances are straining under the weight of defense spending and fiscal support. The recent escalation of conflict in the Middle East and an unresolved tariff standoff aren’t helping.

Market risks remain the biggest red flag. Fixed income volatility may have eased slightly, but equity market turbulence and the risk of disconnect between stock prices and fundamentals continue to keep risk managers on edge. Insurers’ investment portfolios haven’t shifted dramatically, though exposure to underperforming commercial real estate remains a concern.

Liquidity and funding risks show mixed signals. While cash flow positions are looking healthier, liquid asset ratios declined slightly, and high lapse rates persist—raising questions about policyholder behavior under stress.

Solvency and profitability remain solid overall. Capital buffers are strong, and returns on assets and premiums have improved. But other profitability metrics are wobbling, and life insurers are seeing less movement than their non-life counterparts, who benefited from a better combined ratio in Q1.

Digitalization and cyber threats are gaining momentum. Supervisors noted an uptick in the perceived probability of incidents, and insurer sentiment is growing more cautious around system vulnerabilities. As insurers take on more cyber underwriting exposure, the operational and financial risks grow more entangled.

Market sentiment, for now, is cautiously optimistic. Non-life stocks are up, life insurance stocks less so. CDS spreads narrowed, and insurance remains a relatively safe haven in a shaky market, but elevated valuations and global uncertainty could make that sentiment short-lived.

On the ESG front, green bond holdings are up, but climate-relevant asset exposure dropped slightly. Physical climate risks, such as windstorms, remain a constant backdrop.

Reading Between the Lines

If there’s one throughline from both dashboards, it’s that we’re not in crisis, but we’re far from comfortable.

For those managing risk and resilience across pensions and insurers, now is not the time to exhale. With geopolitical instability, economic headwinds, and digital threats all swirling in tandem, the environment demands continuous vigilance, adaptive stress testing, and sharper scenario planning.

Risk levels may be steady for now, but with so many potential triggers on the horizon, resilience isn’t just about having strong capital positions. It’s about anticipating where the cracks could widen next.

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