The European Insurance and Occupational Pensions Authority (EIOPA) has proposed that insurers fully back their crypto holdings with a 100% capital reserve to mitigate inherent risks and high volatility.
Impact on Luxembourg and Sweden
Luxembourg and Sweden insurers are expected to face significant impacts, with 69% and 21% of crypto exposures respectively. This represents about €655 million of the €655 billion in European insurance assets as of the fourth quarter of 2023.
Mirroring Bank Requirements
The proposal mirrors the transitional treatment of crypto-assets adopted under the Capital Requirements Regulation for banks, requiring a full capital backing.
Potential Implications on Insurers
EIOPA's proposal, currently under review by the European Commission, could lead to increased capital requirements for insurers, potentially impacting their balance sheets and investment strategies.
The regulation of crypto-assets may result in increased scrutiny and tighter norms in crypto insurance, affecting financial and risk management strategies.
