Fitch Ratings Maintains Neutral Outlook for North American Life Insurers in 2026

Fitch Ratings has maintained a neutral outlook for the North American life insurance sector in 2026, emphasizing that the industry's strong balance sheets will help cushion against anticipated economic slowdowns and increased macroeconomic and geopolitical uncertainties. The agency highlights that life insurers are expected to preserve robust capitalisation, prudent asset-liability management, and solid liquidity despite these challenges and growing exposure to private credit. Investment risks are projected to rise moderately, with a continued preference for investment-grade bonds alongside an increasing allocation to less-liquid assets such as private credit, driven by partnerships with alternative investment managers. Fitch expresses caution regarding these investments' performance during potential credit market downturns. The sector is also experiencing growth in offshore reinsurance and relationships with alternative investment managers, trends expected to persist into 2026. These developments contribute to a dynamic regulatory landscape focused on ensuring insurers maintain capital commensurate with their risk profiles. Regulatory bodies like the National Association of Insurance Commissioners (NAIC) and the Bermuda Monetary Authority (BMA) have introduced initiatives to increase transparency and resilience, addressing both capital adequacy and the expansion of offshore reinsurance. Financial performance in 2026 is forecasted to show stable operating earnings with net investment income benefiting from spread widening, though partially offset by declines in policy rates. Commercial real estate assets remain under pressure but are showing signs of easing, with expected credit loss reserves rising to reflect market challenges. Any potential increases in commercial real estate losses are anticipated to remain manageable relative to capital levels. Industry experts note that increasing investment risk and shifting portfolio allocations will keep the regulatory environment active. Overall, Fitch's assessment acknowledges the evolving asset composition of life insurers and the attendant incremental risks from private asset classes, balanced by the sector's strong capital and risk management practices. The ongoing regulatory scrutiny and market dynamics require continued attention by insurers to balance growth opportunities in alternative investments with prudent risk controls to maintain financial stability.