EIOPA – Analysis of internal models for non-life insurance underwriting risk

On January 4, the European Insurance and Occupational Pensions Authority (EIOPA) published the results of a European comparative study on non-life insurance underwriting risk.

With the study –based on non-life insurance contracts of 75 European insurers of 31 insurance groups– was the differences in internal models have been assessed to understand if and to what extent the contracts evaluate similar risks, since the underwriting risk for non-life insurance significantly contributes to the solvency capital requirements of insurance companies.

From the study emerged inter alia that companies with similar economic profit and loss distributions exhibit significant differences in their capital levels.

Additionally, analyses demonstrated that moderate and prolonged inflation can impact companies more than temporary spikes. Therefore, companies should monitor inflation risk and their exposure to it, as changes in inflation trends could lead to an increased solvency capital requirement.