Institutions for occupational retirement provisions’ (IORPs) exposure to market and asset return risks is currently at a high level, the European Insurance and Occupational Pensions Authority’s (EIOPA) first Risk Dashboard on IORPs has revealed.

Based on individual occupational pensions regulatory reporting, EIOPA’s IORP Risk Dashboard summarises the main risks and vulnerabilities in the IORPs sector of the European Economic Area (EEA) for defined contribution (DC) and defined benefit (DB) schemes.

The dashboard, which will be updated on a quarterly basis, includes a set of risk indicators covering traditional risk categories, such as market and credit risks, liquidity risks, reserve & funding risks, as well as emerging threats like environmental, social and governance (ESG) and cyber risks.

Currently, IORPs’ exposure to market and asset return risks is at a high level, making this the most relevant risk category for the sector given the still high volatility in bond markets. Macro risks are at a medium level but EIOPA said there are positive developments related to a reduction in forecasted inflation, partially offset by a GDP growth outlook that remains weak by historical standards.

Liquidity risks are at a medium level but show an increasing trend compared to the previous quarter, driven by developments in derivative positions. The net asset value of IORP's derivative positions went further into negative territory due to the continued increase of interest rates in Q3-2023, EIOPA noted.

All other risk categories are currently assessed at a medium level, with increases expected for credit risks as well as digitalisation and cyber risks over the next 12 months, EIOPA’s dashboard revealed.

The risk dashboard was developed in cooperation with National Competent Authorities to systematically monitor and assess risks and the evolution of them in the IORP sector from a macroprudential perspective. It also aims to analyse the potential vulnerabilities of IORPs’ financial position and their implication to financial stability at the EEA level.

Data in the dashboard is based on the latest IORP reporting data with reference up to the third quarter of 2023. The data is based on regulatory reporting collected from 625 IORPs. This information is complemented with data from external sources with a cut-off date of end-December 2023.

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