IORPs’ exposure to market and asset return risk ‘remain high’ – EIOPA

The exposure of Institutions for Occupational Retirement Provisions (IORPs) to market and asset return risks remain high due to continued market volatility and real estate market vulnerabilities, the European Insurance and Occupational Pensions Authority (EIOPA) has found.

Its most recent IORP Risk Dashboard, published today, shows an overall stable risk assessment but market risks remain a key concern. EIOPA said market and asset return risks are stable at a high level with volatility increasing in the fixed income and equity markets at the end of June.

Furthermore, the latest data points to a continued decline in real estate prices across the Euro area, mainly driven by commercial real estate. Recently available annual data shows a rebound in the IORPs' portfolio performance in 2023 driven by positive market returns, EIOPA stated.

The dashboard also found that macro risks are at a medium level with forecasted GDP growth for major geopolitical areas showing positive developments but remaining low by historical standards.

Credit risks remain stable at a medium level with credit default swaps (CDS) spreads for corporate bonds increasing at the end of June 2024, while remaining broadly stable for government bonds.

In addition, reserve and funding risks are unchanged at a medium level, with the financial position of defined benefit IORPs remaining robust in the first quarter of 2024 supported by higher interest rates.

Concentration risks are also at a medium level, with a decreasing trend compared to the previous quarter due to lower sectorial and geographical concentration in the IORPs' investment portfolio. IORPs' median exposure to banks and financial activities other than banking slightly increased.

EIOPA added that all other risk categories are currently assessed at medium levels, with an increasing risk outlook for digitalisation and cyber risks over the next 12 months.



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