The European Insurance and Occupational Pensions Authority’s (EIOPA) Occupational Pensions Risk Dashboard shows that IORPs’ exposure to market and asset return risks remains high due to market volatility and real estate market vulnerabilities.

Its IORP Risk Dashboard, based on the latest IORP reporting data with reference up to the fourth quarter of 2023, summarises the main risks and vulnerabilities in the IORP sector of the European Economic Area (EEA) for the different schemes.

EIOPA said annual indicators, such as portfolio return (based on 2022), do not yet capture the positive market performance of 2023.

However, macro risks are at a medium level with macroeconomic indicators showing signs of positive developments. This includes a decline in forecasted inflation and improvements in the GDP growth outlook – economic growth nevertheless remains relatively weak.

Furthermore, liquidity risks are at a medium level but show a decreasing trend compared to the previous quarter, driven by developments in derivative positions. The net asset value of IORPs’ derivative positions, which are typically used to hedge against a drop in interest rates, shifted closer to zero from earlier negative readings due to lower market interest rates in Q4-2023.

EIOPA said reserve and funding risks remain unchanged at a medium level with a slight deterioration in the financial positions of defined benefit IORPs due to lower interest rates. All other risk categories are currently assessed at a medium level, with increases expected in the risk level for digitalisation and cyber risks over the next 12 months.

EIOPA’s data is based on regulatory reporting collected from 625 IORPs. This is complemented by data from external sources with a cut-off date of end-March 2024.

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