(Reuters) – Insurance companies in the EU are facing risks on several fronts that are intensified by the COVID-19 pandemic and may face long legal battles from claims related to lockdowns, the bloc's insurance watchdog said on Thursday.  Insurance companies and reinsurance companies had a "solid and comfortable" capital buffer going into the crisis, the European Insurance and Occupational Pensions Agency said in a financial stability report.
"But a high level of uncertainty about the size of economic disruptions increases disadvantages risks in the future," it said.
"COVID-19 has further intensified the existing challenges of the long-term, low-yield environment, a fundamental risk for both the insurance and pension sectors."
In addition, some insurance companies risk becoming involved in long and costly legal battles over claims made as a result of lockdown measures, EIOPA said.
Some players are already facing potential multi-million euro lawsuits from small businesses in the hospitality and leisure industry that claim legitimate allegations of business interruptions have been rejected.
The watchdog has told insurers to temporarily discontinue all discretionary dividends and repurchases of shares to preserve capital.
EIOPA said that different recovery scenarios should be captured in the design of next year's EU-wide insurance stress test.