Solvency of life and non-life insurance companies and pension insurance companies as at 31 March 2020: Life and non-life insurance companies’ solvency at a good level and pension sector’s at a moderate level


The solvency buffers of the life and non-life insurance companies and the flexibilities in the solvency framework helped to withstand the strong volatility in the investment markets in the first quarter of 2020. Despite the exceptional circumstances, the companies’ solvency position remained good. In the pension sector, the largest impacts on solvency materialised in March, following the negative developments in the investment markets. The changes in the operating environment caused by the coronavirus pandemic will become evident in the solvency of life and non-life insurance companies only in the longer term, whereas in pension insurance the impacts are already visible.

Pension assets decreased in the first quarter 2020

In the pension sector, the average return on investment at the end of March was -9.0%, which weakened the solvency ratio, i.e. the amount of pension assets relative to technical provisions. The total return on pension assets was eroded particularly by the returns on listed shares, but the return on fixed-income investments was also negative, due to the widening of credit risk margins of higher-risk debt securities.

The average solvency position, i.e. the ratio of pension institutions’ solvency capital and solvency limit, deteriorated significantly. Solvency capital decreased, reflecting mainly revaluations of investments. At the same time, there was also a decrease in the solvency limit, i.e. pension institutions’ risk-based imputed solvency capital requirement, but at a lower rate than solvency capital. The decline in the solvency limit was due to the above-mentioned changes in investment assets and the smaller share of higher-risk investments in the portfolio. The employee pension sector’s average solvency is still at a moderate level. At the end of April, pension institutions’ average solvency ratio was 123% and solvency position was 1.6.

Life-insurance companies’ solvency ratio strengthened despite a decline in equity prices

The solvency ratio of the life insurance sector was higher than at the end of 2019 and a year ago, i.e. at the end of March 2019. The decline in the value of equities was reflected as a decrease in the capital requirement for equity risk, which in turn lowered the solvency capital requirement for life insurance companies. At the same time, the difference between the companies’ assets and liabilities decreased, however.

Life insurance companies’ investments yielded a negative return (-4.5%) in the first quarter of 2020. In addition to equities, fixed-income investments also yielded negative returns. The return on real estate investments remained positive.

Non-life insurance companies’ solvency buffers were sufficient to cover the effects of the sharp fall in the investment markets

The solvency ratio weakened at the end of March, and was at its lowest since the introduction of Solvency II regulation, but remained good nevertheless. In the case of all the non-life insurance companies, the amount of own funds exceeded the solvency capital requirement. Investment activities generated a loss (-4.2%), which decreased the amount of own funds and weakened solvency. Returns on investment were eroded by the fall in equity prices as well as wider risk margins. The decrease in the amount of own funds was also due to the decrease in technical provisions, reflecting seasonal fluctuations and the lower level of interest rates.

The Financial Supervisory Authority (FIN-FSA) publishes regularly, on a quarterly basis, information on the capital position of the Finnish financial sector. Information on the second quarter of 2020 will be published in September. In the exceptional situation caused by the coronavirus crisis, the FIN-FSA is monitoring the financial sector particularly closely.

The banking sector’s capital ratios for the first quarter will be published towards the end of June. The reporting timeline for the banking sector was extended by one month due to the coronavirus crisis.




For further information, please contact Kaisa Forsström, Head of Department, Insurance Supervision. Requests for interviews are coordinated by FIN-FSA Communications, tel. +358 9 183 5250, weekdays 9.00–16.00.

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Finanssivalvonta, or the Financial Supervisory Authority (FIN-FSA), is the authority for supervision of Finland’s financial and insurance sectors. The entities supervised by the authority include banks, insurance and pension companies as well as other companies operating in the insurance sector, investment firms, fund management companies and the Helsinki Stock Exchange. We foster financial stability and confidence in the financial markets and enhance protection for customers, investors and the insured.

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