The European Insurance and Occupational Pensions Authority (EIOPA) has recommended that the European Commission set new capital requirements for insurers holding cryptocurrencies.
EIOPA's Proposed Changes
EIOPA has recommended a 100% capital requirement for all crypto assets. This move aims to reduce insurers' investments in digital assets, as the U.S. plans to ease restrictions for traditional financial institutions. Currently, most EU insurers allocate capital equal to 60%-80% of crypto assets.
Impact on the Insurance Market
EIOPA's proposal targets not only cryptocurrencies like Bitcoin and Ethereum but also stablecoins pegged to fiat currencies and tokenized assets backed by traditional investments such as debt or equities. This marks the first time such severe requirements have been imposed on any asset class held by insurers.
Crypto Asset Holdings by End of 2023
By the end of 2023, European insurers held around €655 million worth of crypto assets, making up less than 0.01% of their total €9.6 trillion in assets. Most of these assets were concentrated in Luxembourg, suggesting indirect exposure through investment funds rather than direct ownership.
Despite the stringent measures, the impact is expected to be limited in the short term. The proportion of crypto assets remains negligible compared to insurers' total assets.
