The Austrian Financial Market Authority (FMA) published its Report on the State of the Austrian Insurance Industry today. As of 30 June 2019, Austrian insurance manage assets amounting to EUR 132 billion. Generally they hold conservative portfolios dominated by bonds, which by and large service the long-term commitments in relation to life insurance. Approximately EUR 68 billion, i.e. Approximately 60% of total managed assets were invested in government and corporate bonds as well as bond funds. Unlike other European countries, the Austrian insurance industry invests more strongly in corporate debt (26%) than in government debt (21%). In contrast, the home market share of the bond portfolio, of only 25%, is below the European average.
Trend towards non-exchange listed asset classes
In Europe on the whole there is an identified trend towards non-exchange listed asset classes. The prevailing low interest environment and the trend of a deterioration of the economic situation are leading to an increase in the credit risk of bonds with poor credit quality. In accordance with the international trend, real estate, with a total market share of more than 10% is one of the most attractive asset classes. The share of real estate to UGB financial income has increased in the last ten years from 3.5% in 2008 to 8.1% in 2018, and has thereby more than doubled.
The portfolios of individual insurers are showing signs of search for yield behaviour in the low interest environment e.g. By increasing the holding of long-term bonds and low credit quality as well as loans and real estate. Investments in infrastructure have more than trebled since 2016 in light of new regulatory incentives. As of 30 June 2019, Austrian insurance undertakings for the first time had invested more than EUR 1 billion in infrastructure. That the search for yield is less strongly noticeable in Austria compared with internationally may be attributable to the diversified business models, prudent cover pool (Deckungsstock) provisions as well as the fact that bond portfolios still have relatively long residual maturities.
Cyberresilience of Austrian insurance undertakings
Based on the FMA’s Digitalisation Study about the Austrian Financial Market, the FMA paid particular focus in 2019 to the vulnerability of the Austrian insurance sector to cyber risks. In order to be able to assess the Austrian insurance sector’s cyber resilience, as well as potential areas for improvement, the FMA developed an analysis tool in order to be able to measure the level of preparedness of the Austrian insurance industry in relation to cyber risks (Cyber Maturity Level Assessment-Tool). The findings have shown that on average, Austrian insurers have already taken material steps towards guaranteeing their cyber security. However, there is a noticeable discrepancy between their levels of maturity in a technical sense and an organisational sense. Overall, cybersecurity is currently strongly driven in a “bottom-up” way in insurance undertakings. Only four out of ten undertakings have already explicitly drawn up a cybersecurity strategy. The highest level of maturity has been attained by undertakings in the fields of IT assets (currentness, completeness and automation of the inventory processes for hardware and software), authorisation concepts and network security. There is however a mixed picture in the fields of security configuration and backing-up of data. Fundamental measures such as using a virus scanner as well as backing up of data are by and large implemented, although farther-reaching measures such as the usage of specialist software for protecting databases are currently still not widespread. Vulnerability management and patch management still show room for improvement in several undertakings. There is also need for improvement in relation to the protection of administrator accounts as well as in terms of technical protective measures in the field of logging and monitoring.
The full report can be found online (in German only) on the FMA website
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