## EXECUTIVE SUMMARY (1autea2026005) ## Source details **Canonical URL:** [EXECUTIVE SUMMARY (1autea2026005)](https://www.imf.org/-/media/files/publications/cr/2026/english/1autea2026005.pdf) ## Other formats - [Markdown version](/-/media/files/publications/cr/2026/english/1autea2026005.pdf.md) - [Structured JSON version](/-/media/files/publications/cr/2026/english/1autea2026005.pdf.json) --- ### Introduction and scope - Technical Note analyzes regulatory and supervisory framework governing insurance companies and insurance groups in Austria, based on framework and practices in effect as of November 2025. - References: Insurance Core Principles (ICPs) and ComFrame issued by IAIS in December 2024. - ICPs analyzed: 12 ICPs (including ComFrame elements) focused on governance; solvency requirements; supervisory approach (micro and macro); exit from the market and resolution; and group supervision and cross-border co-operation. - Prepared by: Suzette Vogelsang. ### Market structure and performance — size, composition, and trends - Total insurance assets: equivalent to 28 percent of GDP (industry summary); elsewhere reported around 27 percent of GDP (detailed section). - End-2024 Solvency II insurers: 32; top six account for 66 percent of total gross written premiums. - Market segmentation of gross premiums: - Non-life insurance: 64 percent. - Pure life insurance: 22 percent. - Health business similar to life: 14 percent. - Growth trends: - Non-life segment average growth: 7 percent over the past four years. - Life insurance sector (including health business similar to life) average increase: 1.75 percent over the past four years; notable decline in 2021 due to Covid-19; no growth in 2023. - Within non-life: motor coverage remains leading class. - Life: with-profit participation contracts largest segment but market share steadily decreasing. - Only capital guarantee investment products available due to prescribed maximum guaranteed rate cap at zero percent. - Industry structure and cross-border activity: - Five insurance groups; three domestically systemically important. - One IAIG; one insurance-led financial conglomerate; one bank-led financial conglomerate. - Seven international insurance groups have subsidiaries in Austria. - Since 2022, premiums from foreign operations exceed domestic ones and the difference is growing. ### Key risks and vulnerabilities - Principal exposures: persistent inflation, volatile interest rates, rising liquidity and interconnectedness risks, growing climate-related and digitalization/cyber risks. - Specific channels and effects: - Inflation and interest-rate shifts affect profitability, reserving, lapse behavior, and asset valuations across life and non-life insurers. - Liquidity pressures increased due to negative technical cash flows and greater exposure to less liquid assets; overall resilience remains solid. - Climate risk: more frequent and severe natural catastrophes increase claims and protection gaps; supervisory reviews and stress testing intensified. - Digitalization and cyber risk: advancing but uneven; DORA implementation relevant. - Supervisory implications: - Heightened supervisory responsibilities for the FMA given evolving macroeconomic landscape and regulatory changes (Solvency II Review, IRRD, DORA). ### Regulation and supervisory framework — institutional responsibilities - FMA responsibilities: insurance conduct and prudential supervision at both micro and macro levels. - Macroprudential coordination: Financial Market Stability Board (FMSB) chaired by BMF; FMA reports quarterly and annually. - Insurance intermediaries supervision: - FMA supervises distribution by insurers or banks. - Ministry of Economy, Energy, and Tourism (MoEET) supervises independent agents and brokers; supervision conducted by over a hundred local district-level supervisors. - Insurance Department staffing (end 2024): - Total headcount for insurance supervision: 59 FTEs; actual staff 58.4 FTEs. - 54.4 FTEs (92.18 percent) working in Insurance Department. - Average age: around 44 years. - 92.62 percent have specialized qualifications. - Division average experience: - General Supervision: 17.3 years - Prudential Supervision: 11.4 years - On-site and Internal Models: 9.1 years - Analyses: 14 years - Recommendation (capacity): establish a systematic approach for assessing staff capacity, including workload distribution, mitigate key-person dependency risks, and ensure adequate budget when required. - Timing: MT - Authority: FMA ### Financial soundness — assets, concentrations, profitability, and solvency - Insurance penetration and density (end 2024): - Life and Health insurance penetration: 1.7 percent. - Non-life insurance penetration: 3.1 percent. - Life and Health insurance density (EUR per capita): 906. - Non-life insurance density (EUR per capita): 1 617. - Market size and licensing: - 72 licensed insurers as at end-September 2025. - Solvency II covers 31 licensed insurers and one branch of a Swiss insurer; remaining 40 are small mutual insurers. - 23 EEA insurers operate through branches in Austria; 24 Austrian insurers operate in other EEA countries through branches. - Market concentration: - Over 60 percent of gross written life and health premiums collected by 3 insurers; top 10 collect 88 percent. - Non-life: ~46 percent of gross written premiums collected by 3 insurers; top 10 collect 81 percent. - For 32 Solvency II insurers, top 6 collect 66 percent (end 2024). - Profitability and underwriting: - Life business: underwriting losses (excluding investment results); reliance on investment income. - Non-life combined ratio: 100 percent (mainly due to floods in September 2024); improved to 92.3 percent in Q2 2025. - Cost ratio: 34 percent (stable). - Net retention rate: 74% percent. - Return on equity (RoE): positive across types; slight decrease in 2024; composite insurers highest RoE. - Investment yields by insurer type: - Life insurers: 1.5 percent - Composite insurers: 2.5 percent - Non-life insurers: 3.5 percent - Asset composition (end-2024; EEA comparators in parentheses): - Holdings in related parties: 28 percent (EEA: 18 percent) - Collective Investment Schemes (CIS): 20 percent (EEA: 22 percent) - Corporate bonds: 21 percent (EEA: 24 percent) - Government bonds: 18 percent (EEA: 27 percent) - Real estate exposure: - Total real estate exposure (excluding unit linked): around 10 percent of total assets. - Composite insurers hold 91 percent of total real estate exposure; non-life hold 7 percent. - 98 percent of real estate exposure held directly; split almost evenly between commercial and retail real estate. - Average rental yield on market value (H1 2025): approximately 2.85 percent. - Base Case (Q4 2024): a 25 percent market correction would lead to a 24-basis point drop in the SCR ratio; no insurers would have solvency ratio below 140 percent. - Bank exposures (excluding unit-linked): 13 percent of total assets. - Asset duration (weighted average years to maturity): - Life: 11.41 / 11.4 / 14.57 (2020 / 2022 / 2024) - Non-life: 11.62 / 15.21 / 7.88 (2020 / 2022 / 2024) - Composite: 11.97 / 10.97 / 13.92 (2020 / 2022 / 2024) - Matching of maturities — weighted average to maturity assets vs liabilities: - Life: 14.57 years (assets) vs 11.34 years (liabilities) - Non-life: 7.88 years (assets) vs 6.59 years (liabilities) - Composite: 13.92 years (assets) vs 16.8 years (liabilities) - Solvency metrics: - Median solvency ratio end-2024: 253 percent - Median solvency ratio end-June 2025: 264 percent - European medians: Life insurers 216 percent; Non-life insurers 214 percent; European group median 182 percent - All Austrian insurers meet required solvency ratio; 24 holding more than double the required ratio. - Own funds composition and EPIFP: - EPIFP as percentage of own funds: 2020 20%; 2021 20%; 2022 24%; 2023 27%; 2024 29%. - Basic own funds: 99 (2021 %), 99 (2022 %), 99 (2023 %), 99 (2024 %) - Reconciliation reserve: 74 (2021 %), 76 (2022 %), 78 (2023 %), 79 (2024 %) - Subordinated liabilities: 10 (2021 %), 7 (2022 %), 7 (2023 %), 7 (2024 %) - Share capital and capital reserves: 12 (2021 %), 12 (2022 %), 11 (2023 %), 11 (2024 %) ### Liquidity — monitoring, indicators, and vulnerabilities - Median liquid asset ratio at end-2024: around 44 percent. - Negative technical cash flows (life and composite insurers): rose from 40 percent to over 90 percent since 2023. - Allocation to alternative investment funds: less than 1 percent in 2017; 4.2 percent in 2022; 3.8 percent in 2024. - Surrender payments as % of Gross written premium (life): 39 percent in 2023; 29 percent in 2024. - Insurers’ total exposure to the financial sector: slightly above 40 percent of total assets. - Securities borrowing exposures: below 10 percent of total assets. - Exposure to bail-in able securities: under 5 percent of investments as of Quarter 2 2025. - FMA actions: - Liquidity monitoring since 2020; three largest insurers report granular liquidity items for EIOPA monitoring. - VUSA provides daily solvency estimates and top-down stress testing capability. - 2024 floods demonstrated adequate liquidity positions; FMA surveyed reinsurance arrangements in 2025 (no asset-intensive reinsurance found). - Recommendation (liquidity monitoring & stress testing): continue liquidity monitoring and granular reporting; continue stress testing on natural catastrophes (group level and insurers with material NaTCat risks). - Timing: ST (stress testing recommendation listed elsewhere: ST) - Authority: FMA ### Solvency framework, internal models, and capital requirements - Solvency II review (EU-level) enacted January 2025; applicable from January 30, 2027; introduces technical and prudential changes including revised Volatility Adjustment, cost-of-capital rate for risk margin at 4.75 percent, a lambda factor, new proportionality framework, and a macroprudential toolkit. - IRRD enacted January 2025; applicable from January 30, 2027; introduces resolution tools and pre-emptive recovery planning expectations. - Internal models (end-2024): - Four solo insurers (from two groups) used full internal models. - Two Austria-based groups with five solo insurers applied approved partial internal models. - The four full-model solo insurers account for 17.3% of total insurance assets and are subsidiaries of foreign groups. - Groups with partial models represent 53.5% of assets. - Model governance and supervision: - FMA conducts pre-application on-site and off-site reviews; OeNB provides expert opinion for market risk models. - Major model changes typically submitted annually; between 2022 and 2024 FMA considered and approved four model changes for full internal model users and three for partial internal model users. - FMA does not formally collect extra data to compare internal model SCRs to standard formula SCRs for the same insurers. - Recommendation (model drift & floor): introduce a model drift analysis (comparison of standard formula to internal model SCR) and consider implementing a floor to internal model calculations consistent with Basel III reforms and European legislation. - Timing: ST - Authority: FMA ### Governance, fit & proper, outsourcing, and supervisory practices - Corporate governance: VAG contains clear requirements; Austria operates a two-tier board system. - Fit & proper regime: - Oral examinations for all board members and chair of supervisory board; oral exams for control functions case-by-case. - Notification: at least 30 days before appointing supervisory or managing board members; immediate notification for other appointments after they occur. - FMA powers: request removal/reassignment, restrict new business. - Outsourcing: - All insurers have at least one outsourcing agreement; over half outsource ITC services; almost half outsource asset management (mainly intra-group). - FMA notification required in advance; approval required if service provider is not an EEA insurance company. - Supervisory tools and on-site regime: - Baseline on-site frequency: at least every five years for Solvency II insurers; high-risk insurers (score 3 or above) at least every three years. - Two largest insurance groups: at least one Austrian company examined yearly. - Recent activity: 28 on-site visits in past 12 months; 93 from 2020 to 2024. - Typical on-site duration: about two months (two to three weeks on-site). - Identified supervisory gaps: - Very limited interaction with supervisory boards. - Need for a structured risk-based and proportionate approach for governance assessment of smaller Solvency II insurers classified as low risk. - Recommendations (governance & supervisory tools): - Continue in-depth assessment of control functions including smaller Solvency II insurers regarded as low risk; develop structured risk-based proportionate approach. - Timing: I / ST (recommendations vary across text) - Authority: FMA - Enhance supervisory tools for interviews with statutory board members and key persons in control functions. - Timing: ST - Authority: FMA - Publish an overview of the new risk-based supervisory framework including the supervisory tools applied. - Timing: MT - Authority: FMA - Implement a quality assurance process to systematically review risk ratings for consistency, analytical rigor and alignment with risk profiles. - Timing: ST - Authority: FMA ### Group supervision, cross-border cooperation, and resolution preparedness - Group supervision: - FMA acts as group-wide supervisor for five Austrian groups (including IAIG); has established international supervisory colleges for five groups. - Challenges: limited resources, absence of secure IT tool for information exchange, balancing participation across supervisors. - No crisis management group established for its IAIG. - Host supervision and branches: - FMA participates in seven supervisory colleges as host supervisor; limited engagement with some host supervisors where Austrian insurers operate as branches. - Recommendation: establish approach to engage and exchange information with other supervisors of Austrian insurers operating in foreign jurisdictions as branches, considering materiality and lines of business. - Timing: ST - Authority: FMA - Resolution and exit framework: - Voluntary exit and distressed measures described in VAG; government recapitalization powers under Finanzmarktstabilitätsgesetz (FinStaG). - Deckungsstock system: separate fund for life, health, and accident insurance; trustee currently always from FMA; trustee reports quarterly and annually and must alert FMA immediately of compliance concerns. - Recommendation (Deckungsstock trustees): conduct an external independent assessment on the appointment of FMA staff as “Deckungsstock” Trustees to conclude if there are any real or perceived conflicts of interest. - Timing: ST - Authority: FMA - Gap: resolution planning and tools not fully in place pending IRRD implementation (applicable January 30, 2027). ### Off-site supervision, data architecture, and analytical tooling - Reporting and data architecture: - Reporting includes SFCR, RSR, ORSA, annual and quarterly Solvency II and national templates, and published annual financial statements. - FMA data architecture layers: bronze (oracle database), silver (Cube-Solution), gold (“Faktenlayer”). - Interfaces: Excel, Power BI, Python, R; automated validation checks and flagging process. - Analytical tools: VUSA sensitivity tool, top-down item-by-item sensitivity tool for bonds, intragroup transactions visualization. - On-site planning and cadence: - Annual on-site plan approved in December; baseline derived from risk scoring and priorities. - In-depth reviews: every two years; 33 in past year involving 113 management meetings. - Recommendations (publication & QA): - Publish overview of new risk-based supervisory framework and supervisory tools. - Timing: MT - Authority: FMA - Implement quality assurance process for risk ratings. - Timing: ST - Authority: FMA ### Macroprudential supervision and reporting - Institutional framework: FMSB leads macroprudential supervision; FMA reports quarterly and annually. - Macroprudential tools and analysis: - Top-down and bottom-up stress tests; investment behavior tool developed. - Macro database, interactive dashboard, and cross-sectoral analyses. - Findings: Austrian insurers hold more corporate than government bonds; herding risk remains low (only about 25 percent of overlapping portfolios result in common sales per quarter). - Recommendation: expand regular insurance sector macroprudential reporting to include analysis of broad trends with short- or long-term implications for market functioning and contagion channels to the wider financial sector and the economy. - Timing: I - Authority: FMA ### Main recommendations (selected, with timing and authority) - Establish a systematic approach for assessing staff capacity, including workload distribution and mitigating key-person dependency risks; ensure adequate budget is available when required. - Timing: MT - Authority: FMA - Continue conducting stress testing on natural catastrophes, like flooding, both at a group level and for those insurers where NaTCat risks are material (focusing on those with branches in neighboring countries). - Timing: ST - Authority: FMA - Implement European legislative changes, notably the Solvency II review and Insurance Recovery and Resolution Directive (IRRD), which will add macroprudential tools such as liquidity risk management plans and improve the resolution and recovery framework. - Timing: ST - Authorities: BMF and FMA - Continue in-depth assessment of control functions including smaller Solvency II insurers regarded as low risk and develop a structured risk-based proportionate approach. - Timing: I - Authority: FMA - Enhance supervisory tools for interviews with statutory board members and key persons in control functions. - Timing: ST - Authority: FMA - Introduce a model drift analysis (comparison of standard formula to internal model SCR) and consider implementing a floor to internal model calculations consistent with Basel III reforms and European legislation. - Timing: ST - Authority: FMA - Review legal requirements relating to risk management for IAIGs to ensure ComFrame requirements are met. - Timing: ST - Authority: BMF - Conduct an external independent assessment on the appointment of FMA staff as “Deckungsstock” Trustees to assess potential conflicts of interest. - Timing: ST - Authority: FMA - Establish protocols to engage and exchange information with other supervisors of Austrian insurers operating in foreign jurisdictions as branches, considering materiality and lines of business. - Timing: ST - Authority: FMA - Publish an overview of the new risk-based supervisory framework including supervisory tools applied. - Timing: MT - Authority: FMA - Implement a quality assurance process to systematically review risk ratings for consistency, analytical rigor and alignment with risk profiles. - Timing: ST - Authority: FMA - Expand regular insurance sector macroprudential reporting to include analysis of broad trends and contagion channels. - Timing: I - Authority: FMA *Source: IMF Technical Note — EXECUTIVE SUMMARY and chapter excerpts (1autea2026005).* ### EXECUTIVE SUMMARY __________________________________________________________________________ 6 ### EXECUTIVE SUMMARY ### Introduction and background - This Technical Note (TN) provides an analysis of the main elements of the regulatory and supervisory framework governing insurance companies and insurance groups in Austria. The analysis is based on the regulatory framework and supervisory practices in effect as of November 2025. - The TN refers to the Insurance Core Principles (ICPs) and Common Framework for the Supervision of Internationally Active Insurance Groups (ComFrame) issued by the International Association of Insurance Supervisors (IAIS) in December 2024. - The TN analyzes 12 ICPs (including ComFrame elements) focused on governance; solvency requirements; supervisory approach (micro and macro); exit from the market and resolution; and group supervision and cross-border co-operation. The authorities provided a full self-assessment for these ICPs. - The TN was prepared by Suzette Vogelsang. ### Market structure and performance - Market size and composition - The insurance industry in Austria holds assets equivalent to 28 percent of GDP. - At the end of 2024, out of 32 Solvency II insurers, the top six account for 66 percent of total gross written premiums. - Market segmentation of gross premiums: Non-life insurance comprises 64 percent; pure life insurance accounts for 22 percent; health business similar to life accounts for 14 percent. - Growth and trends - Non-life segment has consistently grown at an average rate of 7 percent over the past four years. - Life insurance sector (including health business similar to life) has averaged an increase of 1.75 percent over the past four years; experienced a notable decline in 2021 due to the Covid-19 pandemic and showed no growth in 2023. - Within non-life insurance, motor coverage remains the leading class. - For life insurance, with-profit participation contracts are the largest segment, though their market share is steadily decreasing. - Only capital guarantee investment products are currently available, reflecting a regulatory cap on the prescribed maximum guaranteed rate at zero percent. - Industry structure and cross-border activity - Austria has five insurance groups, three of which are considered domestically systemically important. - One group is an Internationally Active Insurance Group (IAIG); another is an insurance-led financial conglomerate; and there is also a bank-led financial conglomerate. - Seven international insurance groups have subsidiaries in Austria. - Since 2022, premiums from foreign operations have exceeded domestic ones, with the difference growing. ### Risks and vulnerabilities - Overview - The Austrian insurance sector is exposed to persistent inflation, volatile interest rates, rising liquidity and interconnectedness risks, and growing exposures to climate-related events and digitalization challenges. - Specific risk channels and effects - Inflation and interest rate shifts: affect profitability, reserving, lapse behavior, and asset valuations across life and non-life insurers. - Liquidity: pressures have increased due to negative technical cash flows and greater exposure to less liquid assets, though overall resilience remains solid. - Climate risk: identified as a major emerging risk—more frequent and severe natural catastrophes increase claims and protection gaps; supervisory reviews and stress testing have intensified. - Digitalization and cyber risk: advancing but uneven; DORA implementation is relevant. - Supervisory implications - The evolving macroeconomic landscape, emerging risks, and regulatory changes are anticipated to heighten the supervisory responsibilities of the Financial Markets Authority (FMA). - Regulatory developments with significant implications include the Solvency II Review, the Insurance Recovery and Resolution Directive (IRRD), and the Digital Operational Resilience Act (DORA). ### Regulation and supervisory oversight - Institutional responsibilities and recent developments - The Financial Markets Authority (FMA) is responsible for insurance conduct and prudential supervision at both micro and macro levels. - The FMA has strengthened its supervisory framework, particularly in data and analytics, and demonstrates effective risk-based oversight. - Areas for further improvement (supervisory practice and tools) - Apply a structured method to review control functions in smaller, low-risk Solvency II insurers and continue in-depth assessment of control functions. - Upgrade interview tools for statutory board members and key control functions. - Implement model drift analysis by comparing standard formula and internal model Solvency Coverage Ratio and consider setting a floor for internal models aligned with banking-sector requirements. - Assess legal requirements relating to risk management for IAIGs to ensure ComFrame requirements are met (ICP 16 emphasis). - Establish protocols for sharing information with foreign supervisors of Austrian insurers operating abroad, considering materiality and lines of business. - Publish an overview of the new risk-based supervisory framework and introduce quality assurance measures for risk assessments to ensure consistent and rigorous risk ratings. - Broaden macroprudential reporting across the insurance sector. ### Main recommendations on insurance regulation and supervision (excerpt) - Establish a systematic approach for assessing staff capacity, including workload distribution and mitigating key-person dependency risks and ensure adequate budget is available when required. - Timing: MT - Authority: FMA - Continue conducting stress testing on natural catastrophes, like flooding, both at a group level and for those insurers where NaTCat risks are material (focusing on those with branches in neighboring countries). - Timing: ST - Authority: FMA - Implement European legislative changes, notably the Solvency II review and Insurance Recovery and Resolution Directive, which will add macroprudential tools such as liquidity risk management plans and improve the resolution and recovery framework, especially for domestically systemically important insurers and groups. - Timing: ST - Authorities: BMF and FMA - Continue with the in-depth assessment of control functions including smaller Solvency II insurers that are regarded as low risk. And develop a structured risk-based proportionate approach in this regard. - Timing: I - Authority: FMA - Enhance supervisory tools for interviews with statutory board members and key persons in control functions. - Timing: ST - Authority: FMA - Introduce a model drift analysis (comparison of standard formula to internal model SCR) and consider implementing a floor to internal model calculations consistent with the Basel III reforms in banking in line with European legislation (consistent with euro-area recommendations). - Timing: ST - Authority: FMA - Review the legal requirements relating to risk management for IAIGs to ensure all the ComFrame requirements are met. - Timing: ST - Authority: BMF - Conduct an external independent assessment on the appointment of FMA staff as “Deckungsstock” Trustees considering the legal obligations, the supervisory responsibilities and the internal FMA policies and guidance to conclude if there are any real or perceived conflict of interest. - Timing: ST - Authority: FMA - Establish an approach to engage and exchange information with other supervisors of Austrian insurance companies operating in foreign jurisdictions as a branch, taking into account the materiality of those branches as well as the lines of businesses conducted. - Timing: ST - Authority: FMA - Publish an overview of the new risk-based supervisory framework including the supervisory tools applied. - Timing: MT - Authority: FMA - Implement a quality assurance process to systematically review risk ratings for consistency, analytical rigor and alignment with risk profiles. - Timing: ST - Authority: FMA - Expand the regular insurance sector macroprudential reporting to include analysis of broad trends that could have short- or long-term implications for the functioning of the insurance market and related financial sectors. - Timing: I - Authority: FMA *Timing codes: I Immediate (within 1 year); ST Short Term (within 1-2 years); MT Medium Term (within 3−5 years).* *Source: IMF Technical Note — EXECUTIVE SUMMARY (1autea2026005).* ### 4. The comments on progress in respect of the recommendations made in the previous ### 4. The comments on progress in respect of the recommendations made in the previous ### Progress on previous recommendations - The comments on progress in respect of the recommendations made in the previous assessment are included in Annex A. - The FMA has implemented all the recommendations that were solely in their area. - Recommendations not yet fully implemented relate to the EU Level Insurance Recovery and Resolution Directive that will come into force at the end of January 2027. - The author is grateful to the authorities and private sector participants for their excellent co-operation and benefited from inputs and views expressed in meetings with insurance regulators and supervisors, insurance companies and industry and professional organizations. ### Institutional Framework - The FMA is the integrated supervisor of the insurance sector and carries out both prudential and business conduct supervision for all insurers. - FMA objectives: contributing towards financial stability, taking actions in case of non-compliance of regulatory requirements and protecting policyholders. - Regulatory requirements are enacted at EU level or by the government (mostly the BMF) through laws and regulations; main legislation is the Insurance Supervision Act (VAG). - The FMA must consider the objective of financial stability throughout the European Economic Area (EEA) and good practices and recommendations issued by EU supervisory systems such as the European Insurance and Occupational Pensions Authority (EIOPA). - Insurance intermediaries supervision: - FMA supervises distribution of insurance products directly by insurers or banks. - Independent insurance agents and brokers are under the oversight of the Ministry of Economy, Energy, and Tourism (MoEET). - MoEET is responsible for consumer protection in the financial and insurance sectors as well as supervision of insurance brokers and agents. - Supervision of insurance brokers and agents is conducted by over a hundred local supervisors at the district level. - The FMA together with the MoEET and Federal State Officers, following the 2020 FSAP recommendations, have put in place various coordination and cooperation arrangements. - Macroprudential supervision: - Led by the Financial Market Stability Board (FMSB), chaired by the BMF, including the Fiscal Advisory Council, Oesterreichische Nationalbank (OeNB) and the FMA. - Primary responsibility: address risks to financial stability as identified by the OeNB; issue recommendations for action and risk warnings. - Insurance sector information is reported by the FMA to the FMSB on a quarterly basis and via an annual contribution to the FMSB annual report. - Key stakeholders in the insurance sector: - Austrian Insurance Association (VVO) — primary industry body representing Austrian insurers. - Audit Oversight Authority (ABAP) — oversees the audit profession. - Chamber of Tax Advisors and Auditors — central regulatory and representative role. - Austrian Financial Reporting and Auditing Committee (AFRAC) — independent standard-setting body. - Austrian Actuarial Association (AVÖ) — independent private organization and member of the Actuarial Association of Europe (AAE). - Austrian Consumers’ Association (VKI) — represents policyholder interests, publishes product tests, provides legal advice, initiates class actions. - Insurance Ombudsman — independent mediator for disputes between consumers and insurers. ### Insurance, Pension and Corporate Provision Companies Supervision (Insurance Department) - Insurance Department structure and staffing: - Consists of four divisions with a functional approach to allocation of roles and responsibilities. - Total headcount allocated to insurance supervision is 59 (full time employees (FTEs), with actual staff of 58.4 FTEs (end 2024). - Of these, 54.4 FTEs (i.e. 92.18 percent) are working in the Insurance Department and the remainder allocated to the Integrated Supervision Department within the FMA. - The average age of staff members within the Insurance Department is around 44 years. - 92.62 percent of the staff have specialized qualifications such as actuaries, lawyers, economists, accountants, asset management experts. - The Analyses Division has the largest staff complement. - Division FTE’s average experience in FMA: - General Supervision: 17.3 years - Prudential Supervision: 11.4 years - On-site and Internal Models: 9.1 years - Analyses: 14 years - 2020 FSAP recommendations and FMA response: - The 2020 FSAP recommended the FMA assess staff expertise and resources for ongoing improvement of Solvency II, market conduct supervision, and recovery and resolution frameworks. - Since 2020, the FMA has restructured tasks and launched extensive training. - Staff turnover is low, and Insurance Department staffing has remained stable for over a decade. - Observed during this FSAP: some staff members are overstretched, and critical functions depend on a limited number of individuals. - Recommendation: - It is recommended that the FMA establish a systematic approach for assessing staff capacity, including workload distribution and mitigate key-person dependency risks and ensure adequate budget is available when required. ### Insurance Sector—Key indicators and structure - Insurance penetration and density (end 2024): - Life and Health insurance penetration: 1.7 percent (end 2024). - Non-life insurance penetration: 3.1 percent (end 2024). - Life and Health insurance density (premium per capita in EUR): 906 (2024). - Non-life insurance density (premium per capita in EUR): 1 617 (2024). - Market size and licensing (as at end-September 2025 and end-2024): - 72 licensed insurers as at the end of September 2025. - Solvency II covers 31 of these licensed insurers, and one branch of a Swiss insurer conducting business in Austria. - Remaining 40 are small mutual insurers. - In addition, 23 EEA insurers are operating through branches in Austria, and 24 Austrian insurers are operating in other EEA countries through branches. - Number of licensed insurers has been declining mainly due to mergers; no new insurers were licensed over the last few years. - Market composition and concentration: - Austria has a historical high number of composite insurers and a high number of mutual insurers. - For insurers under Solvency II: 16 are composites, and 6 are mutuals of which 4 are composites. - At the end of 2024: 83 percent of total gross written premium came from composite insurers; mutual insurers comprised 5 percent; composite mutual insurers underwrote 3 percent of total gross written premium. - Exemptions from VAG: - Pension companies licensed under the “Pensionskassen” Act (separately regulated). - Personal insurance provided by corporations under public law exclusively to their members (excluding reinsurance activities). - Undertakings engaged solely in funeral cost insurance with limited coverage. - Recent legal developments: - Several court cases and rulings on insurance contracts over the last five years led to settlements and legislative amendments to the Insurance Contract Act. - Issues addressed include policyholders’ rights to withdraw from life insurance contracts due to incorrect or missing information about withdrawal rights; certain cost and fractional premium surcharge clauses deemed invalid for lack of transparency and subject to reimbursement. - Legal debate over inflation adjustment clauses in rental contracts may shape consumer protection standards for long-term contracts including life insurance contracts; latest ruling and amendments to consumer protection law questioned the general application on long-term contracts. ### Market Structure and Performance—Assets, concentration, and business mix - Total assets and GDP ratios: - Total assets of the insurance sector (including index and unit-linked life business) as a percentage of nominal GDP are declining. - More than two thirds of the decline since 2016 are related to the fall in bond prices due to the sudden steep rise in Euro interest rates in 2022. - Inflation persistently higher in Austria than the Euro area average contributes to the rise in nominal GDP. - The total assets are around 27 percent of GDP, around 13 percent of the total assets of the banking sector. - If total assets of the pension and corporate provision funds are included the total assets of these three sectors will be around 37 percent of GDP. - Austria’s total insurance assets as a percentage of GDP are in line with Finland but much lower than France (around 100 percent), Germany (around 60 percent) and Italy (just under 50 percent). - Low percentage reflects social system with limited demand for private pension and health products apart from supplementary health products. - Market concentration and competitiveness: - Over 60 percent of gross written life and health premiums are collected by 3 insurers; top 10 insurers collect 88 percent of total gross written life premiums. - Non-life sector: in 2024 around 46 percent of gross written premiums were collected by 3 insurers with 10 insurers collecting 81 percent of total gross written premium. - Of the total 32 Solvency II insurers (2024) the top 6 insurers collect 66 percent of total gross written premiums (end 2024). - Business mix and trends: - Non-life insurance comprises 64 percent of total gross premiums; life and health comprises 36 percent. - Non-life insurance growth: steady growth on average of 7 percent over the last four years. - Life and health insurance: mixed results; significant decrease in 2021 (attributable to the Covid-19 pandemic), no growth in 2023, average growth of 1.75 percent over the last four years. - Non-life dominated by motor class of business; motor, property and casualty, and fire and other damage to property insurance together make up 71 percent of total non-life gross written premiums (end 2024). - Compulsory third-party liability insurance exists for certain professions (lawyers, tax advisors, architects, doctors). - Changes to non-life contracts in recent years include longer travel insurance coverage and inclusion of COVID-19 as valid reason for trip cancellation; limited sum assured for natural catastrophe events like floods. - Life insurance classes and trends: - With-profit participation contracts represent the largest segment of life insurance though prevalence is declining. - Guaranteed interest rate for with-profit participation contracts currently capped at zero percent by the FMA’s Regulation on the Maximum Interest Rate for Insurance Undertakings (VU-HZV), 2015. - Trend since 2020: with-profit participation policies’ net written premiums decreased by (7) percent; unit-linked policies’ net written premiums increased by 2 percent. - Health business similar to life is the second largest insurance class and showing the most growth. - Unit-linked policies are the third largest class of life insurance business. - PZV (Prämienbegünstigte Zukunftsvorsorge) state subsidized retirement savings plan: - Minimum 10-year contract; can be offered through an insurance policy or through a pension investment fund (via Kapitalanlagegesellschaften). - Access to capital not possible during minimum 10-year contract period and afterwards only at specific times with some deductions. - Currently sold by four insurers; half of the premiums are collected by one insurance group. - At the end of 2024 there were 782,000 active policies, half the number it was in 2012. - New business is less than policies that expired or were terminated. - Government backing declined: in 2003 state subsidized premium was 9.5 percent for a premium payment up to EUR1,850; in 2012 the state’s contribution declined with a range between 4.25 and 6.75 percent; currently at 4.25 percent. - Government subsidy limit: EUR 3, 337 for 2024 and EUR 3, 552 for 2025. - Product investment return guarantees: fixed bonus of 2.75 percent, plus a variable portion ranging from 1.5 percent to 4 percent. - The maximum possible government bonus amounts to about EUR 141 for the year 2024 and EUR 150 for the year 2025. - Tax exemptions apply and annuity payments under these contracts are tax-free. - Distribution channels (2024 vs 2023): - Life insurance: 49 percent sold via in-house agents in 2024 (61 percent in 2023). - Non-life insurance: 58 percent sold via in-house agents in 2024 (58 percent in 2023). - Sales via banks in life business increased to 22.1 percent in 2024 up from 17 percent in 2023. - Sales through other channels (dominated by brokers) increased for life insurance business to 28.2 percent in 2024 (22 percent in 2023). - Online sales channels remain a minor source of business. - Systemic importance and international presence: - Five Austrian-based insurance groups; three regarded as domestically systemically important. - One insurance group designated as an IAIG and another is an insurance-led financial conglomerate. - Austrian market also has a bank-led financial conglomerate. - Seven internationally active insurance groups have subsidiaries operating in the Austrian market. ### Box: Foreign Insurance Business – Austrian Insurance Groups (highlights, 2024) - Austrian insurance groups active in 26 other countries (excluding Austria) following exits and acquisitions. - Aggregated net written premiums of EUR 23,671 million in 2024, up 8.8 percent (EUR 1,920 million) from the previous year. - EUR 21,330 million came from insurers and EUR 2,341 million from reinsurers. - Foreign markets contributed EUR 12,919 million, surpassing domestic premiums since 2022. - Key foreign market shares (2024): - Six countries (excluding Switzerland) contributed over 5 percent of foreign premium volume, representing 66.7 percent of total foreign insurance premiums. - Czechia: 23.2 percent; Poland: 17.3 percent; Romania: 7.4 percent; Hungary: 7.1 percent; Türkiye: 5.9 percent; Slovakia: 5.7 percent. - Baltic countries collectively: 5.1 percent. - Market share concentration in specific countries: - Countries with aggregated Austrian insurance group market shares above 30 percent: Czechia (42.92 percent), Slovakia (40.39 percent), Latvia (36.38 percent). - For single insurance groups within the EEA: Slovakia leads with 37.11 percent, followed by Latvia at 36.38 percent and Czechia at 33.48 percent. - Profitability and solvency (2024): - Aggregated net profit of Austrian insurance groups: EUR 2,345 million in 2024, an increase of 8 percent compared to the previous year. - Solvency ratios of all Austrian insurance groups were above 200 percent at year-end 2024. - The FMA analyses macro-economic indicators (GDP growth, inflation and unemployment trends), insurance penetration and density to identify risks and vulnerabilities. *Source: FMA and IMF Staff* ### 27. Solvency II reporting includes limited information on the income statement of ### 27. Solvency II reporting includes limited information on the income statement of ### Reporting and accounting framework - Solvency II reporting includes limited information on the income statement of insurers. - Australian insurers are also required to report under Australian General Accepted Accounting Principles (AGAAP), which supports the FMA’s assessment of insurers’ earnings. - AGAAP valuation basis: - Mainly based on amortized cost with prudence for liabilities and at cost (less depreciation or impairments) for assets except for financial instruments where those are valued at the lowest of cost and fair value. ### Profitability and underwriting performance - Life insurance business: - Making underwriting losses (excluding investment results) and relying on investment income to achieve overall profitability. - Reliance on investment returns is embedded in the business model and reflected in pricing and actuarial calculations. - Non-life insurers: - Combined ratio of 100 percent (mainly because of higher claims due to the floods in September 2024). - Improvement in Q2 2025: combined ratio 92.3 percent. - Cost ratio remained stable at 34 percent. - Net retention rate remains at 74% percent. - Return on equity (RoE): - Various types (life, non-life, composite) all showed positive RoEs with a slight decrease in 2024. - Composite insurers earn the highest RoE; non-life insurers had a slight decrease in RoE for 2024 (linked to higher claims in 2024). - Investment yields by insurer type: - Life insurers: 1.5 percent - Composite insurers: 2.5 percent - Non-life insurers: 3.5 percent ### Asset composition and concentration - Austria insurers (end-2024) — total assets composition (comparative EEA figures in parentheses): - Holdings in related parties: 28 percent (EEA: 18 percent) - Collective Investment Schemes (CIS): 20 percent (EEA: 22 percent) - Corporate bonds: 21 percent (EEA: 24 percent) - Government bonds: 18 percent (EEA: 27 percent) - Asset mix by insurer type (end-2024): - Life insurers: CIS 55 percent of total assets. - Composite insurers: corporate bonds 25 percent, government bonds 23 percent, CIS 21 percent, real estate 13percent, holdings in related parties 16 percent. - Non-life insurers: holdings in related parties 68 percent, government bonds 4 percent, corporate bonds 6 percent; real estate 4 percent; larger deposits at banks and reinsurance recoverables noted. - Note: high related-party exposure in non-life mainly attributable to one large insurance group with participation with large value. - Geographic and currency concentration: - Most assets (excluding unit-linked) are invested in Austria. - Life and composite insurers’ other top country investments: France and Germany. - Non-life insurers: Czechia (and not France) among top investments. - Largest exposure by currency: EUR. ### Real estate exposure (Box 2) - Total real estate exposure (excluding unit linked business): around 10 percent of total assets (among the highest in the EU). - By sector (2024): - Composite insurers hold 91 percent of the total real estate exposure. - Non-life insurers hold 7 percent. - 98 percent of real estate exposure held directly; split almost evenly between commercial real estate (CRE) and retail real estate (RRE). CRE includes commercial residential construction. - Life sector real estate exposure is weighted toward real estate investment funds (collective investments): 61 percent. - Location and use of directly owned real estate: - Nearly two-thirds of market value in districts inside Vienna. - Around 20 percent in provincial capitals across Austria. - Of directly held properties: 43 percent residential, 34 percent office, 10 percent retail, insurers occupy 12 percent of market value. - Market developments and yields: - Since 2022: rental income increased, values mostly stagnated; 2023 values declined; improvement in 2024. - Average rental yield on market value of insurers' real estate portfolios: approximately 2.85 percent during the first half of 2025. - After the increase in interest rates in 2022, government bond yields reached comparable levels; rental yields on substantial portions of insurers' holdings are now considerably lower than risk-free investments, potentially implying downward adjustments to market values. - Sales activity: - Some insurance groups increased sales of directly held real estate in 2024 and H1 2025, diverging from buy-and-hold strategies. - Sales proceeds in 2024 were below reported market values on the Solvency II balance sheet; in 2025 proceeds exceeded market value of sold properties. - Sales rationale: keep share of illiquid assets in cover pool assets stable or reduced. - Legal and supervisory actions: - Pending legal case on adjustment of rent-for-inflation clauses; certain rulings questioned clauses and prior adjustments; latest rulings in July 2025 more landlord friendly. - FMA requests additional data on real estate exposures (e.g., precise location, area, type of use) and conducts cross-market and cross-sector analyses. - Base Case (Q4 2024): a 25 percent market correction would lead to a 24-basis point drop in the SCR ratio with no insurers having a solvency ratio below 140 percent. ### Bank exposures and asset quality - Exposure to banks (excluding unit-linked business): 13 percent of total assets. - Life and composite insurers (88 percent of total bank exposure): - Bank exposures around 15 percent of total assets for each. - Both hold less than 40 percent of their bank exposures in Austrian banks. - Non-life insurers: - Investment in banks weighted towards Austrian banks: 68 percent at end of 2024. - Credit quality: described as high. ### Asset duration and use of derivatives - Weighted average years to maturity of investments (2020 / 2022 / 2024): - Life: 11.41 / 11.4 / 14.57 - Non-life: 11.62 / 15.21 / 7.88 - Composite: 11.97 / 10.97 / 13.92 - Trends: - Life and composite insurers increased weighted average years to maturity from 2022 to 2024. - Non-life insurers reduced weighted average years to maturity over the same period. - Limited use of derivatives observed. ### Liabilities and contract maturities - Technical provisions are the largest component of total liabilities for EEA insurers and Austrian insurers. - Contract boundary and duration: - Life business has longer contract boundaries than non-life business. - Shift toward shorter-term contracts for life and health insurers (based on undiscounted expected cash flows), reflecting maturity of legacy book and growth in health life business. - Non-life insurers have notably moved to annual or longer-term contracts (reflecting growth in short-term health business). - Composite insurers have diversified contract terms with a significant portion of contracts having maturity of 20 years or longer (reflective of “PZV” products and health products). - Matching of maturities: - Life and non-life insurers: matching between assets and liabilities appears well managed. - Composite insurers: show a mismatch when comparing weighted average to maturity of assets versus liabilities, though assets’ weighted average term has been increasing. - Weighted average to maturity — assets vs liabilities: - Life: 14.57 years (assets) vs 11.34 years (liabilities) - Non-life: 7.88 years (assets) vs 6.59 years (liabilities) - Composite: 13.92 years (assets) vs 16.8 years (liabilities) ### Solvency metrics - Median solvency ratio: - End-2024: 253 percent - End-June 2025: 264 percent - Comparison with European industry medians: - Life insurers (Europe median): 216 percent - Non-life insurers (Europe median): 214 percent - European group median: 182 percent - All Austrian insurers meet required solvency ratio; 24 holding more than double the required ratio. - Composite insurers and groups: Austrian groups exceed European group median. ### Risks and vulnerabilities - EIOPA’s Insurance Risk Dashboard (October 2025) based on Solvency II data identifies market risk as top risk for EU insurers; FMA’s assessment aligns with EIOPA’s findings. - Inflation: - Austria expects inflation of 2.9 percent in 2025; eurozone forecast 2.1 percent. - Past peak: 11.60 percent in January 2023. - Inflation effects: - Can lower household income, reduce premium growth, increase policy cancellations. - Raises claims costs for non-life insurers, possibly leading to insufficient reserves and inadequate premiums. - Increases operating expenses for both life and non-life, reducing profitability. - Health insurance particularly affected by medical inflation outpacing general inflation, leading to significant premium hikes and affordability issues. - Many non-life and health policies include automatic inflation adjustment clauses (inflation indexation) which help stabilize profitability. - FMA conducted a top-down stress test after the 2023 inflation spike; findings indicate Austria’s non-life insurers remain resilient. - FMA introduced extensive new reporting on inflation and profitability analysis of life business; concluded industry overall remains stable. - Interest rates: - Sharp increase in 2022–2023 stressed AGAAP results due to exposure to long-term government bonds and AGAAP valuation rules. - Lapse rates: 5.5 percent in 2024 down from 5.9 percent in 2023 (based on volume). - Higher rates reduce balance-sheet liabilities (especially for life) but may decrease new business and increase cancellations; cause unrealized investment losses complicating asset sales under AGAAP. - Short-term rates matter more for non-life insurers due to investment profiles. - Interest rate cuts raise technical provisions and lower investment returns, affecting all insurers. - FMA monitoring and tools: - “VUSA” provides daily solvency estimates and identifies vulnerabilities at company and sector level. - Composite insurers remain sensitive to sudden rate hikes. - Bond portfolios (excluding unit-linked contracts) had a modified duration of 9.10 years in 2025 (a 1 percent rate increase would reduce their value by less than 10 percentage points). - Insurers increased positions in short-term interest-rate swaps in 2025 to hedge interest rate risks. - Liquidity risk: - (Section heading present; content beyond this point not included in supplied text.) *Source: IMF staff calculations and FMA material as presented in the supplied chapter content.* ### 47. Insurers’ liquid assets ratios ### 47. Insurers’ liquid assets ratios ### Liquidity monitoring and measures - The FMA has been doing liquidity monitoring since 2020, with Austria’s three largest insurers reporting for the EIOPA monitoring exercise premium, claims, surrender, investments and intra-group cash flows among others. - The proportion measured is "liquidity-weighted assets relative to total assets." - The median value at the end of 2024 was around 44 percent. - The FMA has assessed allocations to less liquid assets based on individual investment holdings since 2016. - In 2025, the FMA conducted a survey specifically concerning reinsurance and found that, currently, there are no asset-intensive reinsurance contracts in place, with arrangements primarily focused on natural catastrophe risks and guarantees for life business. ### Drivers of liquidity strain and sector vulnerabilities - Under normal circumstances, insurers’ liquidity comes from premium income, investment returns, and active asset liability matching. - During extreme events, insurers can experience liquidity strain due to: - policy surrenders; - certain types of reinsurance arrangements; - material exposure to illiquid assets; - large insurance claims (i.e. natural catastrophe events); - financial market volatility and macroeconomic stress. - Liquidity requirements have become significantly more important for life and composite insurers as the number of entities experiencing negative technical cash flows (without taking into consideration investment income) has risen from 40 percent to over 90 percent since 2023. ### Austria-specific asset allocation and liquidity trends - The median allocation to alternative investment funds (including real estate, alternatives, private equity, infrastructure, and other funds) grew from less than 1 percent in 2017 to 4.2 percent in 2022 and declined to 3.8 percent as of 2024. - Surrender payments as a percentage of Gross written premium of life policies in Austria decreased from 39 percent in 2023 to 29 percent in 2024. - The 2024 floods demonstrated that non-life insurers maintained adequate liquidity positions, supported by robust capitalization. ### Interconnectedness and exposures relevant to liquidity - Insurers’ total exposure to the financial sector amounts to slightly above 40 percent of total assets. - Direct investment exposures are mostly bonds, equity shares, and intragroup loans to banks and have remained unchanged since the 2020 FSAP. - Security lending programs have risen, mainly involving government bonds held to maturity. - Few insurers borrow securities to meet regulations or hedge market risks; these exposures remain below 10 percent of total assets. - Indirect securities lending also occurs via investment funds. - Insurers’ exposure to bail-in able securities is minimal, currently under 5 percent of investments as of Quarter 2 2025. - Intra-group transactions are supervised: the FMA assesses intra-group transactions in yearly risk assessments and has developed a network tool to visualize inter-connectedness within insurance groups and financial conglomerates. ### Regulatory developments affecting liquidity disclosure and oversight - Solvency II Review provides cash flow forecasts and liquidity risk indicators. - From January 2027 insurers will need to: - disclose granular information on the use of liquidity (e.g. dividends) and sources of liquidity (e.g. intra-group cash flows); - develop and keep up to date a set of liquidity risk indicators, for example the central buffer of liquid assets (after discounts for illiquidity), i.e., the liquid asset ratio before and after a selected stress scenario. ### Key statistics - Median liquid asset ratio at end-2024: around 44 percent. - Negative technical cash flows (life and composite insurers): rose from 40 percent to over 90 percent since 2023. - Allocation to alternative investment funds: less than 1 percent in 2017; 4.2 percent in 2022; 3.8 percent in 2024. - Surrender payments as % of Gross written premium (life): 39 percent in 2023; 29 percent in 2024. - Insurers’ total exposure to financial sector: slightly above 40 percent of total assets. - Securities borrowing exposures: below 10 percent of total assets. - Exposure to bail-in able securities: under 5 percent of investments as of Quarter 2 2025. ### Policy recommendations and supervisory actions - The FMA should continue liquidity monitoring and granular reporting, including assessment of intra-group cash flows and liquidity buffers. - It is recommended that the FMA continue conducting stress testing on natural catastrophes, like flooding, including at a group level and in relation to those insurers where NaTCat risks are material focusing on those with branches in neighboring countries. - Maintain and enhance supervisory tools and data collection on less liquid asset allocations, security lending programs, and reinsurance arrangements to identify potential liquidity strains. *Source: 47. Insurers’ liquid assets ratios (IMF chapter text).* ### 68. Since 2020 FSAP various key regulatory changes made at the EU level, and are in the ### 1autea2026005 - 68. Since 2020 FSAP various key regulatory changes made at the EU level, and are in the ### Major EU-level regulatory changes since 2020 - Key EU acts and directives noted as enacted and with implementation timelines: - Solvency II review: enacted January 2025; applicable from January 30, 2027. - Insurance Recovery and Resolution Directive (IRRD): enacted January 2025; applicable from January 30, 2027. - EU Artificial Intelligence Act: enacted August 2024; gradual implementation until August 2, 2027. - Corporate Sustainability Reporting Directive: enacted January 2023; gradual implementation until January 1, 2028. ### Solvency II review — changes and potential impacts - Major technical and prudential changes introduced by the Solvency II review: - Improvements to "long-term guarantee measures" to address risks in low-interest rate environments and prevent undue volatility in capital requirements. - Substantially revised Volatility Adjustment (VA) with a supervisory approval requirement for new VA users. - Cost-of-capital rate for the risk margin set at 4.75 percent (down from 6 percent). - Introduction of an exponential, time-dependent "lambda factor" to account for time dependency of risks and reduce the risk margin. - New proportionality framework; a macroprudential toolkit; technical changes to extrapolation of the risk-free yield curve; provisions related to equity investments. - Supervisory modalities and references: - Supervisory approval is required for new VA users. - For more detailed information, refer to the 2025 Euro Area FSAP – Technical Note on Insurance Micro and Macroprudential Supervision (referenced in source). ### IRRD implementation — tools and requirements - Institutional and planning requirements: - Member states must appoint and authorize one or more authorities to implement resolution tools and conditions before resolution activation and develop resolution plans where deemed necessary. - Resolution tools and powers included: - Solvent run-off. - Asset and liability tool. - Sale of business tool. - Bridge undertaking tool (transfer shares or other ownership instruments, or any assets, rights, or liabilities to a bridge undertaking). - Write-down or conversion tool. - Pre-emptive recovery planning: - Expected that at least 60 percent of a member state’s life and non-life insurance market respectively is subject to pre-emptive recovery planning (to be carried out at group level where applicable). - Threshold basis: these undertakings should account for at least 40 percent of a MS’s life and non-life insurance market respectively using the same basis of calculation as for the threshold for pre-emptive recovery plans. - Financial arrangements for resolution authorities: - Provision for financial arrangements to ensure resolution authority has adequate funds to, at least, pay any ‘No Creditor Worse-Off’ claims through ex-ante or ex post contributions, or a mix thereof, from the country’s insurers. ### FMA preparedness and supervisory conclusion - Implementation status and actions by the FMA: - Supervision under DORA has commenced through several supervisory activities. - A detailed project plan exists for implementation of the Solvency II review and the IRRD. - Drafting of legislation and internal FMA preparations have started; top-down analysis of Solvency II review impact undertaken. - Preliminary finding: - In aggregate, Austrian insurers’, on a net basis, solvency positions will not be materially impacted. - Recommendation: - It is recommended that FMA and Government, as planned, implement these regulatory changes and the operationalization thereof to ensure that all the requirements of the relevant ICPs are met. ### Supervisory oversight — governance, fit & proper, and outsourcing - Corporate governance framework: - VAG contains clear and detailed requirements on corporate governance, risk management and internal controls; requirements apply at both group and insurer levels. - Two-tier board system in Austria: management board (day-to-day operations) and supervisory board (monitors and supports management board). - Fit and proper assessments: - FMA conducts thorough fit and proper assessments for supervisory and management board members and key function holders including heads of compliance, internal audit, actuarial, and risk management. - Assessments include an oral examination for all board members and the chair of the supervisory board; oral exams for control functions on a case-by-case basis. - Insurers must notify the FMA at least 30 days before appointing supervisory or managing board members; other appointments require immediate notification after they occur. - Actuaries subject to additional requirements per FMA Circular 2/2004. - FMA can request removal, reassignment, or reduction in mandate of unfit individuals; can enforce by restricting insurer from conducting new business. - Shareholder/qualifying holding oversight: - FMA conducts fit and proper assessments of shareholders/significant owners holding a qualifying holding (defined as 10 percent or more of voting rights or capital). - If a significant owner becomes unfit, FMA can apply to court for suspension of voting rights and appointment of a Trustee until remedy or disposal to a fit party. - Audit and rotation: - Insurers must inform FMA of statutory auditor firm and responsible audit partner; FMA may apply to court for appointment of a different statutory auditor. - Mandatory rotation regulated by EU Regulation 537/2014/EEC: ten years for firms, seven years for the responsible partner, and a gradual rotation mechanism for most senior personnel with grandfathering until 2037. - Non-audit services allowed if not conflicting; fee caps limit non-audit services to 70 percent of audit fees. - Outsourcing practices and supervision: - All Austrian insurance companies have at least one outsourcing agreement. - Over half report outsourcing ITC services, especially sub-outsourcing and partial ITC work to external providers. - Almost half have outsourced part of asset management; intra-group outsourcing is majority. - FMA must be notified in advance and reviews outsourcing; approval required if service provider is not an EEA insurance company. - FMA can request termination where legal requirements not met; VAG specifies circumstances where outsourcing is not allowed (e.g., materially impairs governance, increases operational risk, impairs FMA monitoring, or risks continuous service provision). ### Supervisory tools, inspections, and recommendations - Supervisory activities: - FMA applies surveys, thematic reviews, on-site inspections (governance-focused or inclusive of governance), and off-site analysis (reports, meetings). - Example reviews: supervisory board and statutory auditor interaction (2025); supervisory board role in governance structures (2021); Implementation of Fit & Proper Requirements (2022); Conflict of interest (2023); Interaction of the Management Board with Compliance Function (2025). - Identified supervisory gaps: - Very limited interaction by FMA with supervisory boards of insurance companies. - Need for a more structured risk-based and proportionate approach for assessing governance in smaller Solvency II insurers classified as low risk. - Recommendations: - FMA should continue in-depth assessment of control functions including smaller Solvency II insurers regarded as low risk and develop a structured risk-based and proportionate approach. - FMA should further enhance supervisory tools for interviews with statutory board members and key persons in control functions. ### Solvency requirements — valuation and technical measures - Coverage and valuation frameworks: - Solvency II framework applied to close to 99.9 percent (percentage of total assets) of insurers in the market; simpler regime applies to 40 very small non-life mutual insurers. - Insurers prepare annual financial statements on local valuation basis, AGAAP (historical cost as common rule; financial instruments lower of cost or fair value). - Listed insurers must prepare published annual financial statements according to IFRS for consolidation; two insurance undertakings are subject to this requirement. - Solvency II valuation principles: - Assets valued at market-consistent fair value. - Insurance liabilities valued as risk-adjusted present values of cash flows without considering insurer’s credit standing. - Best Estimate Liabilities (BEL): probability-weighted average of future insurance liability cash flows, discounted by prescribed risk-free yield curve (EIOPA publishes yield curves). - Explicit risk margin added using the cost of capital approach. - AGAAP-specific provision for guaranteed rates: - Additional interest provision (“ZZR”) required for insurers offering guaranteed interest rates, calculated under FMA Regulation VU-HZV. - Regulation in place since 2013 with minimum requirement increase in 2015 and shortening of the period for full build-up. - ZZR corresponds to absolute amount of a one-year guarantee; part of ZZR was released following sudden interest rate changes in 2022. - In the last three years EUR 245 million have been released and at the end of 2024 the ZZR was EUR 1,2 billion. - Use of Matching Adjustment (MA), Volatility Adjustment (VA), and transitional measures: - No insurer in Austria applies the Matching Adjustment. - At the end of 2024, 13 insurers (representing 70 percent of the total assets) use the Volatility Adjustment (VA). - FMA closely monitors VA use and has approved transitional measures on technical provisions (TP) for 8 insurers; all these insurers would still meet the SCR ratio without using these measures. - FMA’s risk assessment methodology considers the SCR ratio without these measures for insurer risk rating; FMA expects insurers to consider the SCR ratio without these measures in ORSA Reports and risk appetite. - The impact of the TP is declining yearly and will be applicable up to 2032. - Figure referenced: - Figure 13 indicates Austrian insurers remain well capitalized even without any adjustments (source: FMA). ### Investments, real estate risk, and capital adequacy - Investment principles under Solvency II: - Based on the Prudent Person Principle; no prescriptive quantitative limits. - Assets should be invested in a manner ensuring safety, quality, liquidity, yield and consistency; assets covering technical provisions invested consistent with nature and duration of obligations. - FMA supervisory work on investments: - Extensive analysis and supervision including detailed off-site analysis and horizontal reviews (e.g., sensitivity analysis at individual asset level since 2023; review on Commercial real estate 2023). - Findings and reports published, including "State of the Austrian Insurance Industry - FMA Österreich". - Real estate exposure and monitoring: - 2020 FSAP highlighted house price growth susceptibility to macrofinancial shocks and increased likelihood of price correction. - FMA requested additional information on real estate to enhance data quality and granularity. - Regular cross-market analyses and participation in FMA Workstream “Real Estate Network” for cross-sectoral analysis; outcomes shared with FMA board and supervisory colleges. *Source: Excerpt from IMF country publication content unit 1autea2026005* ### 87. The capital requirements of Austrian insurers are calculated in line with Solvency II. ### 87. The capital requirements of Austrian insurers are calculated in line with Solvency II. ### Capital requirements and internal models - The largest component of the capital requirements is market risk. - Austrian insurers benefit from diversification in their capital requirements due to the large number of composite insurers operating in the market. - By end-2024: - Four solo insurers (from two insurance groups) used full internal models. - Two Austria-based groups with five solo insurers applied approved partial internal models for Solvency Capital Requirements. - The four solo insurers using full models, accounting for 17.3% of total insurance assets, are subsidiaries of foreign groups. - Groups with partial models represent 53.5% of assets, applying them to non-life and health underwriting risks, market risk, or property risk within the market module. - No insurer uses undertaking specific parameters for SCR calculations. ### Model approval, validation, and supervision - The approval process for internal or partial internal models follows the Solvency Framework as implemented within the VAG. - Pre-application phase: on-site and off-site reviews produce an informed assessment from the FMA regarding the model’s "approvability"; only models considered approvable proceed to formal application. - For market risk models the FMA must seek an expert opinion from the OeNB and incorporate it into its final decision; in practice, market risk model evaluations are carried out by the national bank accompanied by FMA staff during on-site visits. - Model changes: - Validated as part of the model change process and in accordance with Solvency II Framework requirements. - FMA procedures exist for reporting, approving, and documenting model changes and results. - Approval for major model changes mirrors initial approval but focuses on modified sections; updated model can be utilized once approved. - Typically, major changes are submitted annually allowing a six-month period for approval. - Between 2022 and 2024 the FMA considered and approved four model changes for full internal model users and three model changes for partial internal model users. - Ongoing supervision: - Managed by all four Insurance Department divisions, with the on-site division leading. - Dedicated team averages eight on-site assessments focused on model changes or general reviews from 2022 to 2025. - The FMA does not formally collect extra data to compare SCRs calculated with internal models to those calculated with the standard formula for the same insurers. - Recommendation: - It is recommended that the FMA introduces a model drift analysis (comparison of standard formula to internal model SCR) and consider implementing a floor to internal model calculations in line with European legislation and consistent with the Basel III reforms in banking. ### Capital resources and EPIFP - Austrian insurers have high-quality capital resources, with 99 percent classified as Tier 1. - The reconciliation reserve, primarily comprising the excess of assets over liabilities, is the main component. - Expected profits in future premiums (EPIFP) make up about 30 per cent of the total own funds, with 70 per cent from life business and 30 per cent from non-life (mainly due to health insurance activities). - Breakdown (selected figures as presented): - Basic own funds: 99 (2021 %), 99 (2022 %), 99 (2023 %), 99 (2024 %) - Reconciliation reserve: 74 (2021 %), 76 (2022 %), 78 (2023 %), 79 (2024 %) - Subordinated liabilities: 10 (2021 %), 7 (2022 %), 7 (2023 %), 7 (2024 %) - Share capital and capital reserves: 12 (2021 %), 12 (2022 %), 11 (2023 %), 11 (2024 %) - Surplus funds: 2 (2021 %), 1 (2022 %), 2 (2023 %), 2 (2024 %) - Ancillary own funds: 1 (2021 %), 1 (2022 %), 1 (2023 %), 1 (2024 %) - EPIFP as percentage of own funds: - 2020 20% - 2021 20% - 2022 24% - 2023 27% - 2024 29% - The FMA has a comprehensive approval process for ancillary own funds (article 172 of VAG); approved items to date include a capital commitment and guarantees issued by parent companies. - 2020 FSAP recommendation (implemented): - The FMA should conduct stress testing on segments/business lines where future profitability materially contributes to own funds and impose enforcement actions as appropriate. The FMA implemented bottom-up stress testing and simplified top-down solvency stress tests; 2024 bottom-up-stress test included sudden increase in interest rates and inflation with simultaneous mass lapses, comprising a joint solvency and liquidity assessment. - Recommendation: - It is recommended that the FMA introduces a model drift analysis (comparison of standard formula to internal model SCR) and consider implementing a floor to internal model calculations in line with European legislation and consistent with the Basel III reforms in banking. (Note: repeated here because it relates to capital resources and internal models.) ### Enterprise Risk Management (ICP 16) - ERM activities of insurers and groups, including ORSAs, are subject to extensive regulation and guidance covering Risk Appetite Framework, ORSA with scenario analysis and stress testing, and liquidity risk specifications. - Most ICP standards are addressed through the existing framework; the FMA effectively applies supervisory tools to ORSAs. - Solvency II review will enhance liquidity monitoring and supervision through a new requirement for liquidity risk management plans. - Shortcomings for IAIGs under ComFrame can be addressed through further guidance; the Solvency II regime is principle-based and does not explicitly address all IAIG standards. - No current requirement for recovery plans from insurers; implementation of the IRRD will address this shortcoming. - 2020 FSAP recommendation (not implemented): FMA and BMF to enhance crisis management preparedness by including pre-emptive recovery planning for insurers. The implementation of the IRRD will address this. - Recommendation: - It is recommended that the BMF reviews the legal requirements relating to risk management for IAIGs to ensure all the ComFrame requirements are met. ### Exit from the market, insolvency, and resolution (ICP 12) - Voluntary exit conditions: not underwriting within a year of licensing, ceasing new business for over six months, choosing to stop operations, or transferring all portfolios. No new contracts can be issued and existing ones must end promptly. - FMA protects policyholders via limiting asset disposal (subject to approval and public notice), oversight until contracts close, and possibly requiring deposits or additional restrictions. - Distressed insurers measures (article 284 of VAG) include prohibiting management, appointing a government commissioner, halting new business, or requesting portfolio transfers; FMA can restrict payments if insolvency conditions are met and avoiding insolvency benefits some policyholders, including temporarily suspending surrender payments for life insurers or reducing obligations according to available assets. - Under Article 1 of the Finanzmarktstabilitätsgesetz (FinStaG) the Government may recapitalize a troubled insurer threatening financial stability; tools include assuming liabilities, granting loans or capital, and acquiring shares or convertible bonds. - Insolvency occurs when illiquid or over-indebted as determined under AGAAP; only the FMA can lodge an application for insolvency. - For life insurance, all insurance contracts end with a liquidation order; other contracts terminate one month after the liquidation order. - FMA supervisory responsibilities end upon liquidation; liquidation governed by the Austrian Insolvency Code (IO) with insolvency administrator and Insolvency court responsible for proceedings. - Deckungsstocksystem (article 300 of VAG): safety mechanism for life, health, and accident insurance requiring a separate “Deckungsstock” fund to prioritize claim settlements in bankruptcy or insolvency. - Deckungsstock assets must cover technical provisions and be recorded in a dedicated register (“Deckungsstockverzeichnis”). - Appointed actuary ensures adequacy of provisions. - Trustee (Treuhänder), currently always from the FMA, monitors the register and reports quarterly and annually to the FMA, alerting them immediately of compliance concerns (article 305(1) of VAG). Asset disposals require trustee’s written approval. - FMA oversees the Deckungsstock via inspections and report analyses. - Policyholder priority in liquidation (Article 314 of VAG): Deckungsstock-covered policyholders settled first, then outstanding claims from insured events, then other insurance contract claims ahead of other creditors. - Historical and preparedness notes: - Austria's last insurer insolvency occurred in 1936. - In 2023 the FMA conducted a mock exercise and developed/revised a supervisory handbook for monitoring insurers' financial health and liquidation filing requirements. - Gaps and recommendations: - Current requirements do not cover resolution planning and not all resolution tools are in place; 2020 FSAP recommendation that BMF develop a resolution regime aligned with international standards has not been implemented but will be addressed via IRRD. - Recommendation: - It is recommended that the FMA conducts an external independent assessment on the appointment of FMA staff as “Deckungsstock” Trustees considering the legal obligations, the supervisory responsibilities and the internal FMA policies and guidance to conclude if there are any real or perceived conflict of interest. ### Group supervision and supervisory cooperation (ICPs 23 and 25) - Insurance groups are scoped and annually reviewed; no entities have been excluded from scope, and no entity included solely due to perceived significant influence or dependence. - Three insurers part of groups in Austria have not been scoped as insurance groups where group supervision would not add insight. - Austrian IAIG was notified of designation and consequences, including contribution to IAIS activities; IAIG designation assessed annually. - As group-wide supervisor, the FMA has established international supervisory colleges for five Austrian insurance groups, including its IAIG; holds annual meetings and shares risk assessments regularly. - Challenges: limited resources, absence of a secure IT tool for information exchange, balancing participation among supervisors from various markets. - 2024 “General Supervisory College Meeting” identified supervisory priorities: presentations by the group-wide supervisor, insurance group management, and information exchange about local subsidiaries. - As host supervisor, the FMA participates in seven supervisory colleges, supplies information to group-wide supervisors, and attends at least one annual meeting; challenges include differing supervisory priorities, uncoordinated planning cycles, and extra workload due to limited consideration of host priorities. - The FMA as group-wide supervisor: - Arranges colleges, coordination arrangements for effective information sharing, conducts mapping exercises, uses a standard agenda and a workplan for follow-up actions. - No crisis management group established for its IAIG. - Joint on-site visits held for entities using group internal models; main joint activity is Coordinated Analytical Priorities (CAPs) over three years with questionnaires and discussions on key functions, internal audit, ORSA, and compliance/risk management. - Financial conglomerates: - Austria has two identified financial conglomerates: one insurance-led and one banking-led; two other EU conglomerates have insurance subsidiaries operating in Austria. - FMA’s insurance supervision department oversees financial conglomerates unless bank supervised by ECB via SSM. - Quarterly reporting required on own funds, capital requirements, intra-group transactions, and risk concentrations; as of 2024 annual European-wide harmonized reporting included in Regulation (EU) 2022/2454. - Sectoral supervisors meet quarterly to review each conglomerate’s risk profile and governance to assign risk ratings and supervisory intensity. - Branches and host engagement: - FMA has 24 insurers operating in other EEA countries through branches. - Detailed analysis and annual reporting required on gross written premiums, claims incurred, acquisition expenses and commissions related to branch or freedom of service business (per country). - Limited engagement with supervisors in countries where branches are authorized. - 2020 FSAP recommendation to enhance additional information sharing with host supervisors where Austrian insurers have significant local market share has been fully implemented. - Recommendation: - It is recommended that the FMA establish an approach to engage and exchange information with other supervisors of Austrian insurance companies operating in foreign jurisdictions as a branch, taking into consideration the materiality of those branches as well as the lines of businesses conducted. ### Supervision (Micro prudential) - The FMA follows a comprehensive risk-based supervisory approach with almost all supervisory functions performed in-house; the only outsourced task to OeNB by law is expert assessment of the market risk module (and submodules) for initial approval and major model change processes, and inspections (articles 182(5) and 274(2) of VAG). - Two major projects initiated: “Analytical Framework 2026” and “Supervisory Map” to update the FMA’s Financial and Risk Assessment Process. - Drivers: rise in volatility, crises, and new regulations; increased pressure on SPOC role and analysis/data preparation. - Pilot test in 2025 with full rollout during 2026/2027. - Aim to establish a comprehensive risk assessment framework (CRAF) supported by the functional approach and a comprehensive set of supervisory tools. - CRAF design: - Integrates distributed supervisory activities via modules and sub-modules; each module assigned a division responsible for scope, regulatory requirements, supervisory tools, assessment methods, workflows, and documentation. - Produces an overall insurer risk rating informing planning and supervisory intensity. - Three-layer approach: - Activities layer: supervisory actions (on-site visits, off-site analysis, thematic reviews). - Supervisory module layer: insurer risk profile per module/sub-module categorized as not assessed/low/medium/high risk with annual assessments. - Overall risk and impact scoring layer: overall risk rating and supervisory intensity (scored 1–4: low to very high). - SPOC holds primary responsibility for entity-wide scoring given broad oversight of risk profiles. - The FMA has a wide variety of supervisory tools to support its risk-based supervision model. *Source: FMA and IMF Staff calculations (text and figures as provided).* ### 117. At the group or IAIG level, in addition to regulatory reporting requirements the FMA ### 1autea2026005 - 117. At the group or IAIG level, in addition to regulatory reporting requirements the FMA ### Off-site Supervision: data, architecture, and analytical tooling - The FMA has developed Information Exchange Templates (IET) to be completed by involved supervisors; involved supervisors must submit indicators, outcomes of assessments on the most material aspects of the insurance subsidiaries they supervise, and details of their local supervisory activities. - Submitted information is used to derive a consolidated risk and impact score, which defines the entity's risk score and corresponding supervisory intensity step; all data are aggregated within the Group Risk Report (GRR). - Reporting requirements include: the SFCR, Regular Supervisory Report (RSR), ORSA, annual and quarterly quantitative templates (Solvency II and national reporting), and insurers published annual financial statements. - FMA data architecture consists of three layers: - (i) a bronze layer (oracle database) - (ii) a silver-layer (Cube-Solution) - (iii) a gold layer solution (“Faktenlayer”) combining Key Performance Indicators’ calculation, meta data management and evaluation of KPI ́s. - Interfaces and tools: - FMA uses mostly excel as an interface for dynamic connection to the cube or the database and also has expertise on Power BI/Phython/R built dashboards or interfaces. - Analytical focus: descriptive statistics, trends and peer group analysis (e.g., cross sectoral analysis published in the Annual report on the State of the Austrian Insurance Industry), additional reporting analyses (inflation, real estate risk), and development of the sensitivity tool. - Analysis landscape is centrally available. - Automation and validation: - All reports and incoming data are routed over an incoming platform with an automated interface to the internal electronic filing system and are immediately available to the SPOC. - Automated validation checks are in place, with a flagging process for compliance-relevant Key Performance Indicators (KPIs) and an initial evaluation of KPIs. - The Insurance Division has a dedicated data team to handle queries in the data CUBE. - Analytical toolset examples: - A sensitivity tool (“VUSA”- Tool). - A top-down item by item sensitivity analysis tool for bonds (using cash flow modelling) and convexity. - The VUSA tool is used for top-down item by item stress testing for bonds, equities and properties. - A tool showing graphically an overview of intragroup transactions. - Access to external data platforms such as Refinitiv and Bloomberg. - Outputs and publication: - Off-site analysis outcomes feed into the risk assessment model, engagements with insurers, and supervisory planning. - FMA publications include: Annual Austrian Insurance Statistics (2004), insurance quarterly report (2014), Annual Report on the State of the Austrian Insurance Industry (since 2015), and Annual Analysis on the foreign insurance business of Austrian insurance groups - FIB Report (since 2016). ### On-site Inspections and visits: frequency, planning, and reporting - Baseline visit frequency: - Each Solvency II insurer must be visited at least every five years except if an insurer has a high-risk score (i.e. 3 or above), then it must be visited at least every three years. - For the two largest insurance groups there is a requirement that at least one of the Austrian companies of the group must be examined yearly. - For the two financial conglomerates an on-site visit must be conducted every 5 years. - Planning: - An annual on-site plan is developed at the end of October or the beginning of November and approved by the FMA’s Management Board during December. - The plan is derived from the baseline, key priority topics, staff suggestions, and insurer risk scoring; ad-hoc on-sites update the plan. - On-sites are focused; areas of focus are determined during planning and communicated to insurers. - Duration and scope: - An on-site typically lasts about two months: two to three weeks are spent at the insurer, with the remainder allocated to preparation and reporting. - Internal model on-sites use a different method, allowing multiple visits per year. - Recent activity: - The FMA completed 28 on-site visits in the past 12 months and 93 from 2020 to 2024, fully meeting planned targets. - Every two years, the FMA conducts in-depth reviews of all insurers; in the past year, 33 such reviews were held, involving 113 management meetings. - Reporting of findings: - Key results are presented at a management board meeting about 4–6 weeks after the inspection. - Roughly 8 weeks post-inspection, the FMA sends a written report for insurer comments, typically allowing four weeks for responses, including any remedial actions. ### Recommendations (from the source) - It is recommended that the FMA publishes an overview of the new risk-based supervisory framework including the supervisory tools applied. - Implement a quality assurance process to systematically review risk ratings for consistency, analytical rigor and alignment with risk profiles. ### Macroprudential Supervision: governance, analysis, and reporting - Institutional roles: - The FMSB plays a central role in macroprudential supervision and includes the insurance sector in its oversight; FMSB responsibilities include issuing recommendations for further actions and risk warnings. - FMA internal structure for macroprudential insurance supervision: - One division conducts both top-down and bottom-up stress tests, including sensitivity analyses and quantitative impact studies related to changes in regulatory requirements; this division developed an investment behavior tool. - Another division focuses on micro prudential supervision of large insurance groups, performing host market analyses and monitoring macroprudential issues at individual insurer level (intragroup transactions, real estate exposures). - A dedicated team addresses data management, innovation, and financial stability initiatives across supervised financial sectors. - Information systems and upcoming enhancements: - Macroprudential information is distributed through the FMA in-house extranet and the Central Information and Monitoring Tool, providing updated macroeconomic and financial market data, a macro database of time series, market updates, and an interactive dashboard on supervised entities and economic topics. - The upcoming Solvency II review will further strengthen insurance macroprudential supervision with new toolkit features. - Data and analysis types: - Macroprudential information includes quantitative data (supervisory reports; for insurance groups, sector and macroeconomic information from key countries) and qualitative data (cyber security maturity, cloud, and blackout assessments (2023), a survey on financial reinsurance in the Austrian insurance market, and reviews of supreme court decisions). - Quantitative analysis methods include stress tests, sensitivity analyses, investment behaviour monitoring tools, and risk maps. - Findings on outward risks and portfolio similarity: - Austrian insurers generally hold more corporate than government bonds. - High portfolio similarity can lead to simultaneous sales during shocks. - FMA assessments found: - (i) business models drive portfolio similarity; - (ii) larger common holdings increase the likelihood of joint sales, though diversification strategies help mitigate this; - (iii) only about 25 percent of overlapping portfolios result in common sales per quarter; and - (iv) overall, herding risk remains low. - Reporting cadence: - FMA reports to the FMSB quarterly, covering KPIs like key ratios, premium growth, profitability, solvency, and asset allocation, along with an annual contribution. - Ad-hoc updates are provided after thematic events, such as Storm Boris (2024) and the Ukraine/Russian War (2022). - Recommendation: - It is recommended that the regular insurance sector reporting be expanded to include analysis of broad trends that could have short- or long-term implications for the functioning of the insurance market and related financial sectors and to assess channels of contagion to the wider financial sector and the economy. ### Annex I — Progress on 2020 FSAP Recommendations (selected entries) - Improve targeting of entity specific communication from senior levels to insurance firms (FMA). - Timing: C; Priority: H; Authority response: New process introduced; Status: Implemented. - Continue to focus stress tests on entities with identified vulnerabilities (FMA). - Timing: ST; Priority: H; Authority response: Stress testing is continued; Status: Implemented. - Conduct stress testing on segments/business lines materially contributing to own funds and impose enforcement where needed (FMA). - Timing: ST; Priority: H; Authority response: Stress testing is continued; Status: Implemented. - Enhance additional information sharing with host supervisors (FMA). - Timing: ST; Priority: H; Authority response: Process has been adapted; Status: Implemented. - Initiate studies of conduct risks of insurance brokers and agents (Government). - Timing: MT; Priority: M; Authority response: Starting in 2021, a joint comprehensive survey was conducted; Status: Implemented. - Enhance cooperation with supervisory bodies of brokers and agents at district level (FMA). - Timing: ST; Priority: H; Authority response: Process has been implemented; Status: Implemented. - Enhance crisis management preparedness with pre-emptive recovery planning; reference to IRRD (Directive (EU) 2025/1). - Timing: ST; Priority: M; Authority response: The IRRD entered into force in January 2025 and is applicable from 30. January 2027; The transposition into national law is currently ongoing; Status: Not yet implemented. - Develop a resolution regime in line with international standards; reference to IRRD. - Timing: MT; Priority: H; Authority response: The IRRD establishes a resolution regime; The IRRD entered into force in January 2025 and is applicable from 30. January 2027; The transposition into national law is currently ongoing; Status: Not yet implemented. - Review adequacy of skillset, expertise, and human resources for Solvency II regime and recovery/resolution framework (FMA). - Timing: MT; Priority: M; Authority response: An extensive curriculum was rolled out; Level of human resources quite stable over the last 10 years in Insurance Supervision; Status: Implemented. *Content based on the provided IMF chapter excerpt.* --- _Source: https://www.imf.org/-/media/files/publications/cr/2026/english/1autea2026005.pdf_