- The European Insurance and Occupational Pensions Authority (EIOPA) is proposing a 100% capital requirement for insurers’ cryptocurrency holdings.
- At the end of 2023, European insurers held only a minimal exposure to cryptocurrencies—just 0.0068% of the sector’s total assets.
- The proposal could discourage future investment in crypto assets by insurers.
The European Insurance and Occupational Pensions Authority (EIOPA), the EU’s insurance regulator, has put forward a proposal that would require insurers holding cryptocurrencies to set aside capital equal to the full value of those investments.
Announced in a technical report submitted to the European Commission on March 27, 2025, this recommendation aims to protect policyholders from the extreme volatility and uncertainty associated with digital assets.
Given the price swings seen in cryptocurrencies such as Bitcoin (BTC) and Ethereum (ETH), EIOPA recommends a conservative approach: a 100% capital charge, far higher than the requirements applied to traditional investments like equities or real estate.
Why a 100% capital requirement for insurers’ crypto holdings?
Cryptocurrencies have surged in popularity over the past decade, attracting a wide range of participants from retail investors to large institutions. That demand, however, comes with a major downside: pronounced and sometimes rapid price volatility. Historical examples include steep declines of as much as 82% for BTC and up to 91% for ETH in single years.
These dramatic price moves have prompted regulators to act. EIOPA’s proposal would require insurers to hold capital equal to the total market value of their crypto assets so they could withstand a complete market collapse without jeopardizing policyholders’ protections.
This 100% capital requirement stands in stark contrast to the rules for more conventional asset classes. Equities typically carry capital charges in the range of 39% to 49%, meaning insurers are required to hold less than half the asset value in reserve. Real estate often carries even lower charges, around 25%.
According to EIOPA, cryptocurrencies sit in a distinct risk category due to historically large price drops, even for major tokens like Bitcoin and Ethereum. Unlike equities or property, crypto assets may offer limited or unreliable diversification benefits, exposing insurers to concentrated market risk that regulators are reluctant to ignore.
EIOPA’s careful deliberation
The decision to recommend a 100% capital charge was reached after evaluating several alternatives. EIOPA considered maintaining the current, often inconsistent rules; applying an 80% stress level similar to that used for intangible assets; and adopting a “transparent” approach for tokenized assets that would mirror the risk characteristics of the underlying asset.
Given the relative youth of the crypto market and the scarcity of robust long-term data—factors compounded by the introduction of the EU’s Markets in Crypto-Assets regulation (MiCA)—EIOPA opted for the most cautious path. The authority views a 100% requirement as the safest interim solution while the market and regulatory frameworks mature, and it remains open to revising the stance as more data and clarity emerge.
Notably, EIOPA’s proposal aligns with measures already applied in the banking sector. Under the Capital Requirements Regulation (CRR), banks are subject to a similar 100% prudential treatment for certain crypto-assets during a transitional phase. Harmonizing approaches across banking and insurance sectors aims to create consistent safeguards across the EU financial system.
The EIOPA proposal also addresses a gap left by MiCA, which provides a broad regulatory framework for crypto-assets but lacks specific prudential guidance for insurers. By harmonizing prudential requirements, EU regulators are trying to manage digital-asset risks while preserving financial stability.
Mixed industry reactions
Industry responses to EIOPA’s position have been mixed. Some stakeholders argued during consultations that a blanket 100% requirement is overly rigid and fails to acknowledge differences between highly volatile tokens and more stable, tokenized assets. Critics warn that such a universal approach could stifle innovation or deter insurers from engaging with digital markets.
Supporters, however, praised the prudential stance, pointing to the history of crashes and scandals in crypto markets as justification for conservatism. EIOPA says it has taken both perspectives into account but emphasizes that, for now, caution outweighs flexibility—while leaving room for adjustments as market conditions and data improve.
If the European Commission endorses the proposal, it could significantly change how insurers treat cryptocurrencies. The high capital cost may limit sizable holdings by insurers until market volatility diminishes or regulatory requirements are relaxed.
Beyond the insurance industry, EIOPA’s recommendation could influence global regulatory practices, shaping how other jurisdictions approach prudential treatment of crypto assets within financial institutions.