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Given the ongoing reduction in the accommodative stance of monetary policy, macro risks stand at medium level. However, further downward revisions of economic growth forecasts remain a concern going forward.
Credit and market risks continue at medium level, with Credit Default Swap (CDS) spreads for corporate bonds as well as equity market volatility increasing since September.
Interlinkages and imbalances risks increased due to an increase in intrasectoral exposures that can be explained by corporate actions and Mergers and Acquisitions (M&A) activities by some insurance groups.
Insurance risks also increased following the impact on (re)insurers loss ratios of the natural catastrophes observed in 2018Q3, but remain at low level.
Underpricing and underreserving driven by the competition could be a concern for some lines of business.
Market perceptions are stable at medium level, with insurance stocks outperforming the market in spite of a general deterioration in equity market performance. Insurers' price-to-earnings ratios went slightly down, while CDS spreads slightly increased.