EIOPA report shows overall positive net returns, although the wide variation amongst products underscores the importance of target markets

The European Insurance and Occupational Pensions Authority (EIOPA) today published its annual report on the costs and past performance of retail investment products in the European Union, covering the period from 1 January 2020 to 31 December 2024.

The report provides an overview of the past performance and costs of insurance-based investment products, based on a sample of almost 6,000 insurance products from 175 undertakings representing over 60% of the unit-linked and profit participation premium in the European Economic Area (EEA) and 1,677 products with pension features.

Insurance-based investment products

The findings show that consumers in the EU continue to favour financial products with low-to-medium risk profiles, corresponding to Summary Risk Indicator (SRI) of 3 or less. In terms of distribution, bancassurance remained the dominant channel, accounting for 70% of total premiums, while online sales amounted to only a modest 2.4%.

In terms of performance, unit-linked and similar hybrid products benefited from the strong performance of financial markets and achieved positive net returns for consumers in 2024, with an average of 7.5% for products with low-to-medium risks (which accounted for 80 per cent of the premiums in the sample) and 16.9% for products with higher risk indicators. Profit participation and similar hybrid products, the majority of which guarantee at least 90% of the capital at the recommended holding period, delivered an average net return of 2.3%.

Between 2020 and 2024, net returns of profit participation and unit-linked products with low-to-medium risk were more modest, with nominal annual returns of 1.5% and 2.2% on average, respectively. In contrast, unit-linked products with higher risks managed to outperform inflation during the same period, delivering nominal annual returns of around 8% on average.

Although high-risk products delivered better returns in the period covered by this report, these also expose consumers to possible losses during periods of market downturn. In contrast, the capacity of profit participation products to preserve capital may appeal to consumers who cannot afford to lose capital in times of market downturns. Therefore, adequately defining target markets to ensure financial products are proposed to the right investor audience is essential.

In 2024, the costs associated with unit-linked products showed a decrease of 8 basis points on average, reflecting an increased focus on Product Oversight and Governance and Value-for-Money. However, EIOPA's analysis has shown that costs vary significantly across providers. Costs charged to consumers also show substantial differences between Member States, pointing to structurally higher pricing in certain markets, thus requiring further work at EU level to ensure equal and consistent outcomes for consumers.

Personal pension products

Looking at pension products, personal pension products in Europe where some investment risk is borne by the consumer offered an average return of around 9.6% in 2024 due to favorable market conditions. The annualized net return of these products between 2020 and 2024 was around 4.2%, with considerable variation between Member States. Personal pension products with profit participation features had a modest average return of around 1.4% in 2024, and 1% on average over the previous four years.

Read the Report

Notes

Insurance-based investment products (IBIPs) are insurance products that offer a maturity or surrender value and where that maturity or surrender value is wholly or partially exposed to market fluctuations, directly or indirectly. Typical examples of IBIPs are unit-linked life insurance and profit participation life insurance.

All EEA Member States participated to the exercise except for Cyprus, Denmark, Iceland and The Netherlands.