Insurance market outlook ‘bright’ for 2026 – S&P Global Ratings

Favourable financing and muted liquidity risk mean the outlook for the European insurance sector in 2026 is “bright”, though trade conflicts and weak economic growth threaten to cloud the forecast, according to a new report from ratings agency S&P Global Ratings.

However, the European Insurance Outlook Report 2025, released today (20 November 2025), also highlighted the UK as a region that may see the profitability of the property and casualty (P&C) sector worsen over the coming years.

After the combined operating ratio (COR) for UK P&C reached a nadir in 2022 of 101.5%, the region saw steady improvements, reaching strong profitability in 2024 at 93.5%. The report however, forecasts profitability to drop over the coming years, potentially reaching 99% COR in 2026.

These forecasts were tempered by a degree of unpredictability in the external risks the sector will face across coming years. Trade conflicts, motor insurance claims inflation, muted economic growth, climate change and AI-enhanced cyber attacks were all highlighted as key risks to the market.

Solid operating performance

In contrast, the report suggested that Solvency II reforms could deliver €80bn (£70.2bn) in capital relief to insurers by 2027, while an initiative to encourage insurers to invest in private market assets could increase returns for large firms.

Volker Kudszus, analyst at S&P Global Ratings, said: “We expect the European insurers that we rate will continue to report solid operating performance in 2026, supported by robust capital surpluses.

“At a structural level, we foresee elevated risks for European insurers in 2026 emanating from nations’ divergent environmental policies and growing cyber security threats, though the level of those risks is unchanged from 2025.”