Ongoing transitions from defined benefit (DB) to defined contribution (DC) schemes could impact IORPs’ risk profiles and investment strategies over time, despite strong financial positions, according to the European Supervisory Authorities (ESA).

The ESAs noted that IORPs’ indicators were affected by the Dutch DB to DC transition in the first quarter of 2026, alongside equity market developments.

In their Autumn 2026 Risk Update, the European Banking Authority (EBA), the European Insurance and Occupational Pensions Authority (EIOPA), and the European Securities and Markets Authority (ESMA) identified ‘key vulnerabilities’ for the EU financial system.

These vulnerabilities were external dependencies, emerging technologies, and private credit.

The ESAs warned that the sector’s reliance on non-EU providers and infrastructures could exacerbate the impact of geopolitical shocks and operational disruptions.

Dependence on IT service providers outside the European Economic Area was highlighted as a particular concern, alongside rising cyber risks linked to increasingly capable AI models.

Furthermore, the authorities found vulnerabilities relating to private credit, as while the sector remained relatively small in the EU, its rapid growth, limited transparency, and increasing links with the wider financial system could create risks during periods of stress.

For the insurance and pensions sector, geopolitical tensions were found to be adding volatility and weighing on growth.

Despite these challenges, the ESAs said the EU financial system remained resilient.

They called on supervisors and market participants to strengthen their preparedness and continue to closely monitor risks arising from external dependencies, private credit and emerging technologies.

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