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European Insurance and Occupational Pensions Authority (EIOPA) proposes 100% capital reserves for insurers’ crypto holdings. As of late 2023, European insurers weren’t heavily invested in cryptocurrencies. They held a tiny 0.0068% of the industry’s overall assets. The proposal may discourage future crypto investments by insurers. The European Union’s insurance regulator, European Insurance and Occupational Pensions Authority (EIOPA), has proposed a new rule that would require crypto insurers to hold capital reserves equal to the full value of their cryptocurrency investments. Unveiled by the EIOPA in a technical report submitted to the European Commission on March 27, 2025, this proposal seeks to shield policyholders from the wild swings and uncertainties tied to digital assets. With cryptocurrencies like Bitcoin (BTC) and Ethereum (ETH) known for their rollercoaster price movements, EIOPA is taking no chances, advocating for a 100% capital charge that far exceeds the requirements for traditional investments like stocks or real estate. Why the 100% capital requirement for crypto insurers? Cryptocurrencies have surged in popularity over the past decade, drawing in everyone from casual investors to major institutions. However, their appeal comes with a catch: extreme volatility. For instance, BTC has weathered price drops as steep as 82% in a single year, while ETH has seen declines of up to 91%. Such dramatic shifts have prompted regulators to act, and EIOPA’s latest proposal is a direct response to these risks. By requiring insurers to set aside capital matching the entire value of their crypto holdings, the watchdog aims to ensure that firms can absorb a total loss if the market crashes, protecting the millions of policyholders who rely on their stability. Notably, this 100% capital requirement stands out when compared to the rules for more familiar asset classes. Stocks, for instance, typically carry a capital charge of 39–49%, meaning insurers must…

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Filed under: News - @ March 28, 2025 1:22 pm