EU Regulator Proposes Full Capital Coverage for Insurers’ Crypto Holdings

EIOPA Urges 100% Reserve Requirement for Crypto in Insurance Sector

The European Insurance and Occupational Pensions Authority (EIOPA) has called for insurance companies to fully back their crypto holdings with matching capital reserves, according to a policy proposal released on March 27.  Citing the extreme volatility of assets like Bitcoin and Ether, EIOPA argues that cryptocurrencies pose greater risks than traditional investments such as equities or real estate. The regulator wants to ensure that for every euro insurers hold in crypto, they have another euro in reserve, to protect policyholders from potential losses.

EIOPA’s Four Proposed Regulatory Paths

EIOPA presented four potential options for the European Commission to consider:

• Maintain the current framework (no changes).

• Set an 80% capital requirement, partially covering crypto exposure.

• Impose a 100% capital requirement — EIOPA’s preferred option.

• Launch a broader review of tokenized assets beyond crypto.

The regulator emphasizes that the third option is the most appropriate, arguing that the 80% reserve model does not reflect the severity of crypto’s volatility. Historical data cited includes price drops of 82% for Bitcoin and 91% for Ether.

Impact: Limited, But Concentrated in Key Countries

While crypto exposure among European insurers remains relatively low, a few countries hold the majority of such investments:

• Luxembourg: 69%

• Sweden: 21%

• Ireland: 3.4%

• Denmark: 1.4%

• Liechtenstein: 1.2%

If EIOPA’s recommendations are adopted, insurers in these countries could face stricter capital reserve requirements, potentially impacting their appetite for crypto-backed products. This proposal comes as part of broader efforts by EU authorities to regulate the digital asset sector more comprehensively following the rollout of MiCA (Markets in Crypto-Assets Regulation).