EU Insurance Authority Proposes 100% Capital Requirement for Crypto Holdings

On March 27, the European Insurance and Occupational Pensions Authority (EIOPA) advised the European Commission to mandate that insurance firms hold capital equal to 100% of their crypto asset holdings. This proposal aims to mitigate risks for policyholders due to the "inherent risks and high volatility" of crypto assets. This is a stricter standard than that applied to stocks (39-49%) and real estate (25%). EIOPA outlined four options, with the 100% capital requirement deemed most appropriate, as an 80% stress level was considered insufficiently prudent. EIOPA noted that Bitcoin and Ether have previously fallen 82% and 91%, respectively. While crypto-asset (re)insurance undertakings account for only 0.0068% (€655 million) of all undertakings in Europe, EIOPA emphasizes the risk of total value loss. Insurers in Luxembourg and Sweden are likely to be most affected, accounting for 69% and 21% of crypto asset-related exposures, respectively.