Stability Holds for European Insurers as Global Tensions Complicate the Picture

Key Takeaways

• Overall Risk Level Remains Stable: EIOPA’s January 2026 Insurance Risk Dashboard finds risks in the European insurance sector holding at a medium level, supported by strong capital positions, stable profitability, and solid premium growth.
• Macroeconomic Conditions Offer Support: Continued GDP growth and easing inflation are helping to stabilize the macroeconomic environment, providing a relatively supportive backdrop for insurers.
• Geopolitical Tensions Are a Growing Wildcard: Persistent and widening geopolitical frictions (including developments involving Venezuela, Iran, and emerging tensions around Greenland) are increasing uncertainty around trade, energy markets, and security.
• Market Valuations Remain Vulnerable: Financial markets continue to show signs of potential detachment from fundamentals, with EIOPA warning that a possible unwinding of AI-related asset price bubbles could amplify volatility.
• Resilience, but No Room for Complacency: While credit and liquidity conditions remain broadly stable, rising issuance, refinancing needs, and risks linked to geopolitics, trade disruption, and cyber events call for continued vigilance.

Deep Dive

Europe’s insurance sector is proving resilient in an increasingly unsettled world but the clouds are not lifting. According to the January 2026 Insurance Risk Dashboard published on Thursday by European Insurance and Occupational Pensions Authority, overall risks in the European insurance market remain stable at a medium level, even as persistent geopolitical tensions continue to weigh on the broader economic and market outlook.

On the surface, the macroeconomic picture offers some reassurance. GDP growth is continuing and inflation pressures are easing, helping to keep the economic environment broadly stable. For insurers, that backdrop has supported solid capital positions, steady profitability, and continued premium growth, all signs of a sector that has not lost its footing.

But beneath that stability, uncertainty is building.

EIOPA points to widening geopolitical tensions (including developments involving Venezuela and Iran, as well as emerging frictions around Greenland) as a growing source of risk. These dynamics are complicating expectations around trade, energy markets, and security, while also adding pressure to public finances. Higher government spending on defense and infrastructure, the authority notes, could constrain fiscal space over the medium term, with knock-on effects for the wider economy.

Financial markets, meanwhile, remain vulnerable. Valuation indicators continue to suggest that asset prices may be drifting away from underlying fundamentals. While recent bouts of volatility have so far been contained, EIOPA warns that a potential unwinding of AI-related asset price bubbles could amplify market swings, even if it does not immediately lead to a rise in defaults.

Credit and liquidity conditions are also holding steady, but the dashboard flags early signs of strain. Increased issuance and ongoing refinancing needs are beginning to put pressure on funding dynamics, a trend that bears close watching if market conditions tighten.

For now, the insurance sector’s resilience is doing much of the heavy lifting. Strong capital buffers and stable earnings continue to absorb shocks, helping to keep overall risks in check. Still, EIOPA is clear that this is no moment for complacency. Geopolitical disruptions, trade fragmentation, and the ever-present threat of cyber incidents mean insurers and supervisors alike need to remain alert.

The Insurance Risk Dashboard draws on Solvency II data from the third quarter of 2025 and market data through the end of December 2025. It is based on supervisory reporting from 97 insurance groups and 2,124 solo insurance undertakings across Europe, offering a broad snapshot of the sector’s vulnerabilities and strengths as it enters 2026.

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