EIOPA Pushes for Tighter Crypto Rules in EU Insurance Sector

The European Insurance and Occupational Pensions Authority (EIOPA) is calling for stricter rules on how insurers handle crypto investments. The regulator has advised the European Commission to impose a 100% capital requirement for digital assets held by insurance companies.
Under EIOPA’s recommendation, insurers must fully back their crypto holdings with capital, regardless of how they classify these assets on their balance sheets. The rule would apply to both direct and indirect exposure to digital currencies.

In its technical advice report, EIOPA stressed the risks linked to crypto investments. It pointed out the potential for extreme price swings, market manipulation, low liquidity, and a lack of price transparency. The regulator believes a 100% capital requirement is a prudent approach to managing these risks.

“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,” EIOPA stated.

Currently, European insurers have minimal exposure to crypto. According to the report, insurers in the EU had invested just €655 million ($708.68 million) in digital assets by the end of 2023. That figure represents only 0.0068% of the sector’s total assets, which amount to €9.6 trillion ($10.39 trillion).

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

The Financial Times reports that under the current system, EU insurers allocate capital equivalent to 60% to 80% of their crypto holdings. If the European Commission adopts EIOPA’s proposal, insurers will need to increase those reserves to cover the full value of their digital assets.