EU Regulators Push for Stricter Capital Rules on Insurers’ Crypto Holdings
European insurance regulators are considering a tough new requirement that would force insurers to fully back their crypto holdings with an equal amount of capital.
The move, proposed by the European Insurance and Occupational Pensions Authority (EIOPA), is intended to address concerns over the volatility of digital assets and ensure financial stability within the industry.
In a report submitted to the European Commission, EIOPA presented several options for regulating insurers’ crypto exposure. The most aggressive approach, which the authority strongly supports, would require firms to assume that crypto investments could lose their entire value. Unlike traditional assets such as stocks or real estate, which have far lower capital requirements, cryptocurrencies would face a full 100% capital charge under this framework.
The regulator defended this position by pointing to the extreme price swings seen in the market. Historical data shows that major cryptocurrencies like Bitcoin and Ether have suffered massive losses in the past, dropping by over 80% and 90%, respectively. Because of this unpredictability, EIOPA argues that even an 80% capital requirement may not be sufficient to protect insurers from potential losses.
While crypto-related insurance investments remain a tiny fraction of the sector—accounting for just 0.0068% of total industry exposure—certain regions would be more affected than others. Luxembourg and Sweden hold the largest share of these investments, making up 69% and 21% of reported crypto exposures, respectively. Smaller holdings are found in Ireland, Denmark, and Liechtenstein, where insurers have some exposure through investment funds.
EIOPA insists that these stricter rules would not create significant financial burdens for policyholders. Instead, the regulator sees the measure as a safeguard against future risks, particularly if digital assets gain a more prominent role in the insurance industry. The European Commission will now review the proposal and determine whether to implement the tougher capital requirements.
Editorial Team
Reporter at Coindoo
