The reserve and funding risks of defined benefit IORPs have reduced over the past three months, according to the European Insurance and Occupational Pensions Authority’s latest risk dashboard.

EIOPA stated the risk has dropped from medium to low level, driven by the strengthening of the financial positions of defined benefit IORPs in the third quarter of 2025.

“This improvement reflects the combined effect of strong investment returns, driven by higher equity prices, and the impact of rising long-term interest rates, which lowered the value of pension liabilities,” EIOPA stated.

Overall, the risk dashboard showed that risks in the European IORP sector remain stable, but the outlook for the next 12 months showed that macro, market and asset return risks could increase from a medium to high level.

EIOPA explained that despite the macroeconomic environment showing signs of stability, supported by positive signals from GDP growth and easing inflation, there is still persistent geopolitical instability.

The authority pointed to tensions emerging in Venezuela, Iran and Greenland, which are further heightening global uncertainty.

Regarding market and asset return risks, EIOPA noted that equity market volatility has receded but remains at an elevated level, while bond market volatility remained more contained at the end of December compared to the end of September.

“Valuations remain elevated, with potential vulnerabilities stemming from their detachment from fundamentals, which could be amplified in the event of adverse geopolitical developments,” the authority said.

Nonetheless, EIOPA stated that the IORP sector continues to “demonstrate resilience” with positive portfolio performance throughout 2024 and a strengthening of the financial position of DB IORPs.

“This improvement is mainly driven by the combined effect of strong investment returns, supported by higher equity prices, and rising long-term interest rates, which lowered the present value of pension liabilities,” EIOPA stated.

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