At the end of June, Italian insurers' average solvency ratio had declined by just three percentage points with respect to the end of 2021, remaining at a robust 257 per cent. Available updates confirm this assessment: based on our high-frequency monitoring of capital adequacy and liquidity, this position had not substantially changed by August.
However, as the share of domestic government bonds in insurers' balance sheet is high compared to European peers, insurers are significantly exposed to fluctuations in the country's sovereign spread. The surge in yields and higher inflation did affect the profitability of Italian insurance companies, both for the life and the non-life business. Net unrealised gains have turned negative since May.