EU watchdog proposes full capital reserves for crypto insurers’ holdings

• European Insurance and Occupational Pensions Authority (EIOPA) proposes 100% capital reserves for insurers’ crypto holdings.
• As of late 2023, European insurers weren’t heavily invested in cryptocurrencies. They held a tiny 0.0068% of the industry’s overall assets.
• The proposal may discourage future crypto investments by insurers.

The European Union’s insurance regulator, European Insurance and Occupational Pensions Authority (EIOPA), has proposed a new rule that would require crypto insurers to hold capital reserves equal to the full value of their cryptocurrency investments.

Unveiled by the EIOPA in a technical report submitted to the European Commission on March 27, 2025, this proposal seeks to shield policyholders from the wild swings and uncertainties tied to digital assets.

With cryptocurrencies like Bitcoin (BTC) and Ethereum (ETH) known for their rollercoaster price movements, EIOPA is taking no chances, advocating for a 100% capital charge that far exceeds the requirements for traditional investments like stocks or real estate.

Why the 100% capital requirement for crypto insurers?

Cryptocurrencies have surged in popularity over the past decade, drawing in everyone from casual investors to major institutions. However, their appeal comes with a catch: extreme volatility.

For instance, BTC has weathered price drops as steep as 82% in a single year, while ETH has seen declines of up to 91%.

Such dramatic shifts have prompted regulators to act, and EIOPA’s latest proposal is a direct response to these risks.

By requiring insurers to set aside capital matching the entire value of their crypto holdings, the watchdog aims to ensure that firms can absorb a total loss if the market crashes, protecting the millions of policyholders who rely on their stability.

Notably, this 100% capital requirement stands out when compared to the rules for more familiar asset classes. Stocks, for instance, typically carry a capital charge of 39–49%, meaning insurers must hold less than half their value in reserve. Real estate is even lighter, requiring just 25%.

Cryptocurrencies, however, are in a league of their own, according to EIOPA, which points to historical data showing severe price drops even in well-known assets like BTC and ETH.

Unlike stocks or property, crypto assets don’t benefit from diversification, leaving insurers fully exposed to their unpredictable nature—a risk the regulator isn’t willing to overlook.

EIOPA’s careful deliberation

The decision to impose a 100% capital charge didn’t come lightly. EIOPA weighed several options, including sticking with the current patchy rules or adopting an 80% stress level akin to what’s used for intangible assets.

Another idea was a “look-through” approach for tokenized assets, where the capital charge would reflect the underlying asset’s risk.

But with the crypto market still young and data scarce, compounded by the early stages of the EU’s Markets in Crypto-Assets Regulation (MiCA), EIOPA opted for the most cautious path. The 100% requirement, it argues, is the safest bet until more clarity emerges, though it’s open to revisiting this stance as the market matures.

Notably, EIOPA’s proposal doesn’t exist in isolation—it echoes the approach taken in the banking sector. Under the Capital Requirements Regulation (CRR), banks face a similar 100% stress test for certain crypto assets during a transitional period.

The move brings insurers in line with this, creating a unified front across EU financial sectors. It also plugs a gap left by MiCA, which offers a broad framework for crypto-assets but lacks specific guidance for insurers.

By aligning these regulations, the EU is signaling a coordinated effort to tame the risks of digital currencies while fostering a stable financial environment.

Mixed reactions from the industry

Not everyone is on board with EIOPA’s tough stance. During consultations, some stakeholders argued that a blanket 100% requirement is too harsh, ignoring the differences between volatile cryptocurrencies and more stable tokenized assets.

Critics say this one-size-fits-all approach could stifle innovation or deter insurers from exploring digital markets.

On the flip side, supporters applaud the caution, pointing to the crypto market’s history of sudden crashes and scandals.

EIOPA has heard both sides but insists that, for now, prudence trumps flexibility—though it’s left the door open for future tweaks as more data rolls in.

If the European Commission greenlights this proposal, it could reshape how insurers approach cryptocurrencies.

The high capital cost might discourage significant holdings, at least until the market stabilizes or the rules soften.

Beyond insurers, the decision could ripple outward, influencing how other regulators worldwide handle digital assets in finance.