2026 Outlook for European Insurers: A Mix of Challenges and Opportunities
The European insurance sector, as rated by S&P, demonstrated commendable operating performance across both life and non-life segments in 2025. This trend is expected to persist into 2026, despite the sector facing various external risks, including trade and geopolitical conflicts that could impact the valuation of insurers’ investments. Additionally, muted economic growth is likely to influence the growth prospects of European insurers in the coming year.
Fortunately, the immediate pressure from motor claims inflation is beginning to ease. Insurers rated by S&P have responded proactively with premium rate increases. Primary insurers may benefit from a further softening of reinsurance rates, although commercial lines are still experiencing some pressure on rate levels.
The regulatory landscape continues to evolve, with updates to Solvency II, the rollout of the insurance recovery and resolution directive, and advancements on the insurance capital standard for internationally active insurance groups. We believe that the European insurers we rate are well-positioned to maintain their robust creditworthiness throughout 2026.
“We observe some divergence in operating performance between highly rated, market-leading, and well-diversified insurers and their lower-rated, less diversified peers. Even so, most European insurers we rate are well positioned to maintain their high creditworthiness, despite several external challenges.”
Solid Capital Surplus
A key strength underpinning the ratings in the insurance sector is the capital surplus that exceeds the required capitalization for current ratings. Based on our comprehensive analysis, S&P now anticipates that the capital surplus for rated insurers in Europe will improve to approximately €150 billion ($176.4 billion) in 2026, a revision from our previous forecast of a slight reduction.
This capital surplus is bolstered by prudent capital management, a lower risk appetite, favorable capital markets, slower top-line growth, and fewer-than-expected mergers and acquisitions.
Focus in Non-Life Shifting From Motor to Commercial
Motor claims inflation is no longer a significant burden for the European non-life insurers we rate, following several years of unusually high claims inflation, particularly in Germany. UK non-life insurers have been proactive in implementing early and adequate premium rate adjustments, leading to a decrease in margins.
After a combined ratio for costs and claims of 93.3% for UK non-life insurers in 2024, we expect this to rise to 99.0% in 2026, reflecting increased pressure on rates in commercial lines. We will closely monitor pricing dynamics in commercial and industrial lines across other European markets in 2026.
Other European markets, such as Germany, have been slower to address motor claims inflation. However, we do not anticipate the combined ratio among German non-life insurers to exceed 96.0% in 2026. For continental European markets—including Italy, Spain, and the Netherlands—we forecast that the combined ratio will remain largely stable through 2026.
Some Growth Recovery in Life Insurance
Life insurance is experiencing a resurgence, with growth noted in select European markets. This growth is often driven by single premiums rather than recurring premiums, indicating that life insurers are effectively communicating the unique features of their products and the competitive returns of their investments amid rising interest rates.
Although life insurance products compete directly with investment alternatives from non-insurers, features such as long-term coverage of biometrical risks and tax benefits in certain markets will support demand, particularly in France and Germany. However, due to muted economic growth, we do not expect significant expansion in the life insurance segment across Europe. Our key metric for assessing life insurers’ profitability is return on assets, which we expect to remain robust in 2026.
Limited Private Credit Exposure
We believe that the private credit exposure of European insurers we rate is considerably lower than that of their U.S. counterparts. This is attributed to the larger size of the U.S. private credit market and the conservative asset risk charges in European solvency regulations.
Nonetheless, European life insurers increased their exposure to private credit during periods of low interest rates, with UK insurers holding higher exposures than their EU peers. For many rated European insurers, approximately half of their private credit exposure is linked to mortgages. We do not view this long-dated mortgage exposure as detrimental to ratings, as such investments often align well with life insurers’ long-term liabilities.
As part of its savings and investment union initiative, the European Commission aims to encourage EU insurers to take on a more significant role as investors in private markets. While we do not foresee immediate rating implications from changes in EU insurers’ asset allocation, increased investments from the insurance sector could become relevant in areas such as standardized securitized assets.
European insurers we rate maintain strong liquidity profiles, with exceptional liquidity scores for over two-thirds of these insurers and adequate scores for the remainder.
Regulatory Updates Have Limited Rating Impact
S&P Global Ratings anticipates that updates to Solvency II and any potential regulatory relief will not significantly affect European insurance ratings. We estimated in 2024 that proposed updates might yield a relief of approximately €80 billion ($94 billion) across the European Economic Area.
The final insurance recovery and resolution directive must be integrated into national laws by early 2027. We expect the potential impacts on major European insurance markets to be limited compared to existing insurance supervision and insolvency laws.
We do not foresee the insurance recovery and resolution directive affecting issue ratings in the European insurance sector, as any potential write-down of insurers’ tier 2 hybrid debt—and subsequently senior debt—would only occur in a gone-concern scenario, meaning after the point of non-viability.
For internationally active insurance groups, the global insurance capital standard is currently under development, with regional impact assessments expected throughout 2026. We predict that this capital standard will not add to the existing burden of solvency regulations in Europe, including Solvency II in the European Economic Area and the UK, as well as the Swiss Solvency Test.
We are closely monitoring the development of the insurance capital standard, as it could influence the trigger level for coupon deferral on insurance hybrid debt. For now, however, we do not expect any effect on issue ratings in the European insurance sector.
Our average rating for European insurers falls within the “A” category, with over 80% of ratings carrying a stable outlook. Positive outlooks currently outweigh negative ones, reflecting the sector’s key strengths, including financial and operational resilience, as well as robust capitalization.
We observe some divergence in operating performance between highly rated, market-leading, and well-diversified insurers and their lower-rated, less diversified peers. Nevertheless, most European insurers we rate are well positioned to maintain their high creditworthiness, despite several external challenges.
The European insurance sector, as rated by S&P, demonstrated commendable operating performance across both life and non-life segments in 2025. This trend is expected to persist into 2026, despite the sector facing various external risks, including trade and geopolitical conflicts that could impact the valuation of insurers’ investments. Additionally, muted economic growth is likely to influence the growth prospects of European insurers in the coming year.
Fortunately, the immediate pressure from motor claims inflation is beginning to ease. Insurers rated by S&P have responded proactively with premium rate increases. Primary insurers may benefit from a further softening of reinsurance rates, although commercial lines are still experiencing some pressure on rate levels.
The regulatory landscape continues to evolve, with updates to Solvency II, the rollout of the insurance recovery and resolution directive, and advancements on the insurance capital standard for internationally active insurance groups. We believe that the European insurers we rate are well-positioned to maintain their robust creditworthiness throughout 2026.
“We observe some divergence in operating performance between highly rated, market-leading, and well-diversified insurers and their lower-rated, less diversified peers. Even so, most European insurers we rate are well positioned to maintain their high creditworthiness, despite several external challenges.”
Solid Capital Surplus
A key strength underpinning the ratings in the insurance sector is the capital surplus that exceeds the required capitalization for current ratings. Based on our comprehensive analysis, S&P now anticipates that the capital surplus for rated insurers in Europe will improve to approximately €150 billion ($176.4 billion) in 2026, a revision from our previous forecast of a slight reduction.
This capital surplus is bolstered by prudent capital management, a lower risk appetite, favorable capital markets, slower top-line growth, and fewer-than-expected mergers and acquisitions.
Focus in Non-Life Shifting From Motor to Commercial
Motor claims inflation is no longer a significant burden for the European non-life insurers we rate, following several years of unusually high claims inflation, particularly in Germany. UK non-life insurers have been proactive in implementing early and adequate premium rate adjustments, leading to a decrease in margins.
After a combined ratio for costs and claims of 93.3% for UK non-life insurers in 2024, we expect this to rise to 99.0% in 2026, reflecting increased pressure on rates in commercial lines. We will closely monitor pricing dynamics in commercial and industrial lines across other European markets in 2026.
Other European markets, such as Germany, have been slower to address motor claims inflation. However, we do not anticipate the combined ratio among German non-life insurers to exceed 96.0% in 2026. For continental European markets—including Italy, Spain, and the Netherlands—we forecast that the combined ratio will remain largely stable through 2026.
Some Growth Recovery in Life Insurance
Life insurance is experiencing a resurgence, with growth noted in select European markets. This growth is often driven by single premiums rather than recurring premiums, indicating that life insurers are effectively communicating the unique features of their products and the competitive returns of their investments amid rising interest rates.
Although life insurance products compete directly with investment alternatives from non-insurers, features such as long-term coverage of biometrical risks and tax benefits in certain markets will support demand, particularly in France and Germany. However, due to muted economic growth, we do not expect significant expansion in the life insurance segment across Europe. Our key metric for assessing life insurers’ profitability is return on assets, which we expect to remain robust in 2026.
Limited Private Credit Exposure
We believe that the private credit exposure of European insurers we rate is considerably lower than that of their U.S. counterparts. This is attributed to the larger size of the U.S. private credit market and the conservative asset risk charges in European solvency regulations.
Nonetheless, European life insurers increased their exposure to private credit during periods of low interest rates, with UK insurers holding higher exposures than their EU peers. For many rated European insurers, approximately half of their private credit exposure is linked to mortgages. We do not view this long-dated mortgage exposure as detrimental to ratings, as such investments often align well with life insurers’ long-term liabilities.
As part of its savings and investment union initiative, the European Commission aims to encourage EU insurers to take on a more significant role as investors in private markets. While we do not foresee immediate rating implications from changes in EU insurers’ asset allocation, increased investments from the insurance sector could become relevant in areas such as standardized securitized assets.
European insurers we rate maintain strong liquidity profiles, with exceptional liquidity scores for over two-thirds of these insurers and adequate scores for the remainder.
Regulatory Updates Have Limited Rating Impact
S&P Global Ratings anticipates that updates to Solvency II and any potential regulatory relief will not significantly affect European insurance ratings. We estimated in 2024 that proposed updates might yield a relief of approximately €80 billion ($94 billion) across the European Economic Area.
The final insurance recovery and resolution directive must be integrated into national laws by early 2027. We expect the potential impacts on major European insurance markets to be limited compared to existing insurance supervision and insolvency laws.
We do not foresee the insurance recovery and resolution directive affecting issue ratings in the European insurance sector, as any potential write-down of insurers’ tier 2 hybrid debt—and subsequently senior debt—would only occur in a gone-concern scenario, meaning after the point of non-viability.
For internationally active insurance groups, the global insurance capital standard is currently under development, with regional impact assessments expected throughout 2026. We predict that this capital standard will not add to the existing burden of solvency regulations in Europe, including Solvency II in the European Economic Area and the UK, as well as the Swiss Solvency Test.
We are closely monitoring the development of the insurance capital standard, as it could influence the trigger level for coupon deferral on insurance hybrid debt. For now, however, we do not expect any effect on issue ratings in the European insurance sector.
Our average rating for European insurers falls within the “A” category, with over 80% of ratings carrying a stable outlook. Positive outlooks currently outweigh negative ones, reflecting the sector’s key strengths, including financial and operational resilience, as well as robust capitalization.
We observe some divergence in operating performance between highly rated, market-leading, and well-diversified insurers and their lower-rated, less diversified peers. Nevertheless, most European insurers we rate are well positioned to maintain their high creditworthiness, despite several external challenges.
