The European insurers that S&P rates displayed good operating performance in the life and non-life segments
in 2025, and we expect they will largely continue to do so in 2026. The European insurance sector is exposed to many
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external risks, such as trade conflicts and geopolitical conflicts that could impair the valuation of insurers’ in
vestments. In addition, muted economic growth will also affect European insurers’ growth prospects in 2026.
The immediate pressure from motor claims inflation is easing, and the insurers that S&P rates have responded w
ith premium rate increases. Primary insurers might benefit from further softening reinsurance rates, while commercial lines face some pressure on rate levels.
The regulatory momentum continues, with updates to Solvency II, the rollout of the insurance recovery and resol
ution directive, and progress on the insurance capital standard for internationally active insurance groups. We
believe the European insurers we rate are well positioned to maintain robust creditworthiness in 202
“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 ins
urers we rate are well positioned to maintain their high creditworthiness, despite several external challenges.”
Solid Capital Surplus
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One key strength supporting the ratings in the insurance sect
or is the capital surplus on top of the capitalization that is required for the current ratings. Based on our
bottom-up analysis, S&P now expects that the capital surplus for insu
rers we rate in Europe will improve to about €150 billion ($176.4 billion) in 2026, compared with our previous forecast of a slight reduction.
In our view, the capital surplus is supported by prudent capital management, lower risk appetite, favorable capit
al markets, slower top-line growth, and smaller-than-anticipated mergers and acquisitions.
Focus in Non-Life Shifting From Motor to Commercial
Motor claims inflation no longer weighs on the European non-life insurers we rate, after a few years of unusually high claims inflation, especially in Germany. UK non-l
ife insurers have been ahead of peers in making early and adequate premium rate adjustments and we already observe a decrease in margins.
After a combined ratio for costs and claims of 93.3% for UK non-life insurers in 2024, we expect 99.0% in 2026. Among others, this reflects rising pressure on rate
s in commercial lines. In light of this, we will monitor pricing dynamics in commercial and industrial lines across other European markets in 2026.
Other European markets, such as Germany, have been slower in tackling motor claims inflation. That said, we do not ex
e insurers to worsen beyond 96.0% in 2026. For other continental European markets–including Italy, Spain, and the Net
herlands–we forecast that the combined ratio will remain largely unchanged through 2026.
Some Growth Recovery in Life Insurance
Life insurance is picking up, with some growth in selected European markets. Growth often results from single premiu
ms rather than recurring premiums, which we interpret as a sign tha
t life insurers are effectively communicating the distinctive features of life insurance products and the competitive returns of their investments amid rising interest rates.
Even though life insurance products compete directly with investment alternatives from non-insurers, features such as the long-term coverage of biometrical risks and tax benefits in some markets will support demand, particularly in France and Germany.
Not least due to muted economic growth, we do not expect significant growth in the life insurance segment in Europe. Our key metric to measure life insurers’ profitability is return on assets, which we expect will remain robust in 2026. Despite higher interest rates, we do not foresee material margin expansion, given the higher share of unit-linked and protection products, as well as profit-sharing rules with policyholders.
Limited Private Credit Exposure
In our view, the private credit exposure of European insurers we rate is considerably lower than that of U.S. peers. This reflects the larger size of the U.S. private credit market and the prudent asset risk charges in European solvency regulation.
However, European life insurers increased their exposure to private credit when interest rates were low, with UK insurers holding higher exposures than their EU peers. For many European insurers we rate, about half of their private credit exposure is tied to mortgages. We do not consider that this long-dated mortgage exposure weighs on ratings, as such long-term investments often complement life insurers’ long-dated liabilities.