EU Regulator Pushes for New Capital Rules for European Insurers Holding Crypto Assets

The European Insurance and Occupational Pensions Authority (EIOPA), which oversees the insurance and occupational pensions sectors in the EU, recommends imposing stricter capital requirements for insurers with crypto holdings. 

In a statement, the regulator says it advised the European Commission to introduce a 100% capital requirement for digital assets held by insurance companies.

The proposed rule will apply regardless of how insurance firms label their crypto holdings in the balance sheet or whether they have direct or indirect exposure to digital assets 

“The European Insurance and Occupational Pensions Authority published today its technical advice to the European Commission, recommending that a one-to-one capital requirement be applied consistently to all crypto holdings of EU (re)insurers.”

The regulator says capital requirements should capture the risks associated with crypto assets, including extreme price movements, market manipulation, lack of price transparency and low liquidity. 

“EIOPA considers a 100% haircut in the standard formula prudent and appropriate for these assets in view of their inherent risks and high volatility.”

EIOPA says insurance companies operating in the region do not yet have significant exposure to crypto. The regulator’s technical advice report says that in the last quarter of 2023, EU insurers invested only €655 million ($708.68 million) in the nascent asset, which represents just 0.0068% of their €9.6 trillion ($10.39 trillion) in total assets.

“Overall, the investments of undertakings in crypto-assets are immaterial.”

According to the Financial Times, EU insurers currently allocate capital equal to 60% to 80% of the value of their crypto assets.

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