EIOPA Financial Stability Report published in June 2026 confirms that the EU insurance sector posted its strongest solvency readings in years — yet the same document flags four interlocking vulnerabilities that supervisors expect boards to act on before the next market dislocation. Life insurer SCR ratios, lapse dynamics, private credit concentration and geopolitical energy exposure together define the risk agenda for the second half of 2026.
The 247% capital cushion EIOPA is watching
The headline number from the June 2026 report is capital strength. The median SCR ratio for life insurers reached 247.0% at end-2025, up sharply from 229.7% in 2024, lifted by marginally higher risk-free rates on the balance-sheet valuation date. Composite undertakings came in at 219.0% and non-life at 213.7% — both broadly flat from the prior year’s 216.1% and 213.6% respectively. EEA reinsurers outpaced primary insurers: their median solvency ratio increased by 11 percentage points to 242% at end of 2025, underpinned by high underwriting profitability in 2025.
These ratios sit well above the Solvency II minimum and comfortably above internal management thresholds most large groups maintain. For context, InsuraBeat’s earlier survey of the largest EU insurers showed nine of ten largest EU insurers lifted solvency ratios in 2025 — this report confirms the trend holds across the full EEA population, not just the flagship names. And EIOPA’s own 2025 Annual Report on ten years of Solvency II had already signalled improving capitalisation as interest rates normalised. What changed between that report and this one is the tone on risks beneath the headline ratios.
Why lapse relief may not last
One of the more closely watched indicators in the June 2026 report is the lapse rate trajectory. The median lapse rate in life insurance fell to 3.2% in 2025, down from 3.8% in 2024, and the upper tail of the distribution dropped from 10.8% to 9.5%. EIOPA attributes this to stabilising interest rates reducing policyholder incentives to surrender in-force savings contracts and redeploy into bank deposits or money-market products.
The relief is welcome but the report treats it as conditional. If rates rise again — or if a geopolitical shock triggers equity drawdowns that push policyholders toward guaranteed products — the structural vulnerabilities exposed during the earlier rate-shock episode would resurface. The parallel rise in unit-linked business is also relevant: the unit-linked share of EEA life gross written premiums rose to 38.2% at end-2025 from 35.4% in 2024, with the median reaching 35.2%. Higher unit-linked penetration insulates balance sheets from lapse risk on general-account liabilities, but it transfers market risk directly to policyholders — raising conduct and reputational exposure at exactly the moment supervisors are watching retail market behaviour more closely under EIOPA’s Supervisory Guidelines, whose January 2027 implementation timeline is now locked.
Total EEA life gross written premiums grew 7.5% to EUR 816 billion in 2025, though this decelerated sharply from the 13.8% pace recorded in 2024. Non-life GWP grew 5.2% to EUR 809 billion, also slower than the 8.3% of the prior year, as re-rating cycles matured in property and motor lines.
Private credit and real estate: the illiquid-assets question
The report dedicates significant analysis to illiquid alternative assets, and the numbers are large enough to warrant board-level attention. At year-end 2025, private credit exposure by EEA insurers amounted to EUR 523 billion, representing 5.4% of total investments and 5.0% of total assets. Life insurers are the dominant holders: they allocate 12.8% of their general-account portfolios to private credit, compared with 6.2% for non-life and 3.3% for reinsurers.
Add real estate to the picture — EUR 640 billion, or 9.2% of non-unit-linked investments at end-2025, down from a peak of EUR 660 billion (10.4%) in Q4 2022 as property equity and direct property valuations declined — and EEA insurers carry well over a trillion euros in illiquid or semi-illiquid assets. Against total investments of approximately EUR 6.8 trillion (excluding unit-linked), the combined share is manageable in aggregate, but dispersion matters. EIOPA notes considerable heterogeneity: the liquid asset ratio averaged 52.1% across the EEA at end-2025 (slightly up from 51.3% in 2024), but Liechtenstein, Cyprus and Iceland recorded median liquid asset ratios of just 31.2%, 41.9% and 42.8% respectively — well below the EEA median.
The risk the report articulates is not mark-to-market volatility — Solvency II’s economic-balance-sheet framework already captures that — but liquidity mismatch in a stress scenario. If a geopolitical shock or a rate spike triggers policyholder redemptions faster than private credit or real estate assets can be liquidated at fair value, those liquidity gaps become solvency gaps. Fixed-income assets still dominate at 61.7% of EEA insurer portfolios, providing a liquid buffer, but the bank bond concentration adds a secondary dependency: insurers’ holdings in banks comprised 12.5% of total investments at end-2025, with country-level shares ranging from 5% to 39%.
Geopolitical risk: from survey signal to EUR 5.8 billion direct exposure
Supervisory risk surveys have cited geopolitical risk for several consecutive quarters, but the June 2026 report goes further by quantifying the direct underwriting exposure to the Middle East conflict zone. EIOPA’s Spring 2026 survey showed that 55.6% of insurance supervisors (and 94.4% of IORP supervisors) identified geopolitical risks as the main factor underlying macroeconomic risks — up from 52.9% and 66.7% in the previous quarter.
The report then maps this to balance sheets. EEA insurers’ total direct premium exposure to risks located in Middle East countries affected by the Iran conflict amounts to EUR 5.8 billion, with the UAE accounting for EUR 2.6 billion, followed by Israel at EUR 1.5 billion, Saudi Arabia at EUR 0.6 billion and Kuwait at EUR 0.5 billion. The systemic channel is energy: around 20% of world’s oil and LNG supplies are shipped through the Strait of Hormuz, meaning even a temporary blockade would disrupt global energy flows and feed through to European inflation, corporate credit risk and, ultimately, insurance claims across property, trade credit and business interruption lines.
APRA drew a similar map for Asia-Pacific insurers in its own geopolitical risk guidance — APRA’s minimum expectations for insurer readiness to geopolitical shocks published earlier this year set a precedent for requiring boards to stress-test concentration in specific trade corridors. The EIOPA report stops short of mandating equivalent scenario analyses in the EU, but the data disclosure signals that NCAs have the information to begin that conversation with individual undertakings. The enforcement mechanism was already previewed in the Bulgaria DallBogg case, where EIOPA’s escalation model produced a licence withdrawal — a reminder that supervisory escalation is live, not theoretical.
Natural catastrophe and cyber: contained losses, rising systemic exposure
The June 2026 report also reviews the 2025 natural catastrophe year. Global insured losses reached USD 108 billion, against total economic losses of USD 224 billion — roughly 25% lower than the record levels seen in 2024. The protection gap remains wide: less than half of economic losses were insured. For EEA reinsurers, 2025’s lower loss year fed directly into the improved solvency ratio, and EIOPA notes that strong underwriting profitability supported the sector’s 11 percentage-point improvement in median reinsurance solvency.
On credit quality, EEA insurers hold EUR 1.14 trillion in corporate bonds, of which 92.4% are investment grade, 2.7% are high yield and 5% are unrated. High-yield holdings total EUR 30.3 billion, with unrated bonds at EUR 56.3 billion. In a scenario where a geopolitical shock triggers corporate credit downgrades, migration from investment-grade to high-yield buckets would increase SCR capital charges and compress those headline coverage ratios. Return on assets for EEA insurers edged up to 0.7% in 2025 from 0.6%, while the median return on excess of assets over liabilities — the closest proxy to return on equity — slipped to 8.7% from 9.2%, suggesting that investment income gains are partly offset by rising liability costs.
