European insurers remain financially sound, with stable solvency levels and broadly resilient profitability, but geopolitical uncertainty, external dependencies, natural catastrophes and rapidly evolving technology risks are reshaping the sector's risk landscape, according to the Autumn 2026 update on risks and vulnerabilities in the EU financial system, published by the Joint Committee of the European Supervisory Authorities (ESAs).

The report notes that median solvency ratios remain stable for both life and non-life insurers, while non-life profitability, measured by the combined ratio, has also remained broadly stable. However, the ESAs warn that geopolitical, market, demographic, climate and technological risks could increasingly interact and reinforce each other.

Reinsurance emerges as one of the insurance sector's most significant external dependencies. About 28% of ceded risks are transferred to non-EEA counterparties, with exposures strongly concentrated in the UK, Bermuda and Switzerland. According to the report, this makes ceded reinsurance the industry's most important direct dependency on non-EEA markets and creates potential counterparty and concentration risks.

Insurers are also exposed to developments outside Europe through their investment portfolios. Direct non-EEA investments account for around 13% of total investments, while indirect exposures through collective investment undertakings are significantly higher and concentrated particularly in US assets and listed equities. As a result, insurers remain sensitive to US market valuations, interest rates and exchange-rate movements.

By comparison, insurers' international underwriting exposure is relatively limited. Non-EEA business represents around 10% of total GWP, predominantly in non-life and assumed reinsurance, while only 3.2% of technical provisions relate to non-EEA risks.

Natural catastrophe risks remain another important concern. More frequent and severe NatCat events could further widen insurance protection gaps, the ESAs warn, highlighting the need for prevention incentives, greater consumer risk awareness and European risk-pooling solutions.

At the same time, AI is adding a new dimension to cyber insurance risk. More frequent or severe AI-enabled cyberattacks could increase claims and accumulation risks for insurers. Over the longer term, cyber risk repricing, stricter underwriting and wider use of exclusions could also reduce the availability of insurance coverage.

Private credit is another area receiving increasing supervisory attention. Insurers' aggregate exposures remain limited, but the ESAs point to credit and liquidity risks, valuation uncertainty and insufficient transparency. Insurance exposures are concentrated mainly in mortgages and other loans, followed by unlisted corporate bonds and collateralized securities, while direct private-credit holdings are concentrated in real-estate-related activities.

Against this background, the ESAs recommend that financial institutions strengthen geopolitical scenario analysis and crisis preparedness, closely monitor non-EEA and private-credit exposures, and prepare for emerging AI and quantum-computing risks. Strong operational resilience, cybersecurity controls and contingency planning will remain essential as the risk environment evolves.

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