Real Estate Exposure Should Be Manageable for Most European Insurers

DBRS Morningstar has released a commentary discussing the impact of real estate asset exposure on European insurance companies.

Key highlights include:

-- Insurance companies are among the major investors in the real estate market worldwide.
-- At end-Q1 2023, European insurance companies’ exposure to real estate related assets amounted to EUR 665 billion, around 10% of total balance sheet investments, according to data reported by the EIOPA insurance statistics.
-- European insurance companies' high capitalisation provides a strong mitigant against the risk stemming from their CRE asset exposure.

“Due to the low interest rate environment in recent years, insurance companies have been diversifying their asset allocation towards more remunerative investments, including real estate-related assets. As a result, at end-Q1 2023, European insurance companies’ exposure to real estate-related assets increased by around 26% higher compared with end-Q4 2017,” said Mario De Cicco, Vice President, Global Financial Institutions at DBRS Morningstar. “Nevertheless, this still represented a manageable 10% of their total solvency balance sheet investments.”