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Basel, Switzerland – The International Association of Insurance Supervisors (IAIS) today published its 2023 Global Insurance Market Report (GIMAR), sharing the outcomes of this year’s Global Monitoring Exercise (GME), the IAIS’ risk assessment framework to monitor key risks and trends and detect the potential build-up of systemic risk in the global insurance sector. The GME builds on data collected by year-end 2022 from approximately 60 of the largest international insurance groups and aggregate sector-wide data from supervisors across the globe, covering over 90% of global written premiums.
“GME data indicates that global insurance sector capital adequacy remains sound but has slightly declined at year-end 2022, primarily due to financial market developments such as lower asset valuations,” said Shigeru Ariizumi, IAIS Executive Committee Chair. “Nevertheless, the aggregate systemic risk footprint of the insurance sector decreased at year-end 2022 compared to the year before.”
Key drivers for the decline in system risk scores of the insurance sector are lower exposures to short-term funding, liability liquidity, intra-financial assets and minimum guarantees on variable products. A cross-sectoral comparison of insurance systemic risk scores with the banking sector shows that systemic risk stemming from insurers remains significantly below that of banks.
The assessment of climate-related risks in the insurance sector shows that insurers globally maintained significant exposure to climate-related assets, with insurers continuing to allocate substantial portions of their investment portfolios to climate-relevant sectors, exposing themselves to transition risk. One of the main physical risks of climate change for insurers is the expected increase in claims related to NatCat events. An increase in extreme NatCat events may impact insurers’ profitability, challenge their capital management and may disrupt reinsurance markets.