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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 external risks, such as trade conflicts and geopolitical conflicts that could impair the valuation of insurers’ investments. 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 with 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 resolution 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 2026.

Solid Capital Surplus

One key strength supporting the ratings in the insurance sector 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 insurers 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 capital 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-life 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 rates 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 expect the combined ratio among German non-life insurers to worsen beyond 96.0% in 2026. For other continental European markets–including Italy, Spain, and the Netherlands–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 premiums rather than recurring premiums, which we interpret as a sign that 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.

As part of its savings and investment union initiative, the European Commission seeks to encourage EU insurers to play a more significant role as investors in private markets. While we do not anticipate that ensuing changes in EU insurers’ asset allocation will have any ratings implications, increased investments from the insurance sector could become relevant in areas such as standardized securitized assets.

European insurers we rate have strong liquidity profiles. Based on our rating assessment, the liquidity scores are exceptional for more than two-thirds of these insurers and adequate for the remainder.

Regulatory Updates Have Limited Rating Impact

S&P Global Ratings expects that the Solvency II update and any potential regulatory relief will leave European insurance ratings unaffected. We estimated in 2024 that proposed updates might lead to a relief of about €80 billion ($94 billion) across the European Economic Area.

The final insurance recovery and resolution directive must be transferred into national laws by early 2027. We expect potential effects on major European insurance markets will be limited, compared with existing insurance supervision and insolvency laws.

We do not expect the insurance recovery and resolution directive to affect issue ratings in the European insurance sector. This is mainly because a 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 under development, with regional impact assessments expected throughout 2026. We forecast that this capital standard will not add to the burden of already existing solvency regulations in Europe, including Solvency II in the European Economic Area and the UK, and the Swiss Solvency Test.

We monitor the development of the insurance capital standard closely, as it could affect 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 on European insurers is in the “A” category. More than 80% of ratings carry a stable outlook, with positive outlooks outweighing negative ones. This reflects key strengths of the insurance sector, 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. Even so, most European insurers we rate are well positioned to maintain their high creditworthiness, despite several external challenges.

Topics Trends Carriers Europe