Global P&C Insurance Sector Outlook: Stability Maintained into 2026

Global P&C Insurance Sector Outlook: Stability Maintained into 2026

Moody's Investors Service has affirmed a stable outlook for the global property and casualty (P&C) insurance sector through 2026. This stability is largely driven by expectations of sustained profitability and robust capital levels among insurers, despite the challenges posed by a tempered global economic environment. As the industry navigates these complexities, maintaining regulatory compliance requirements and effective risk management practices will be key.

Moody’s shifted its outlook for the sector from negative to stable in December 2024. This change is attributed to enhanced pricing adequacy in personal lines, supportive commercial lines pricing, and increased investment income. The firm projects that profitability in both personal and commercial lines will remain resilient, benefiting from effective underwriting and claims strategies.

Analyzing recent trends, Moody's highlights that cumulative rate increases have strengthened profit margins for personal motor and homeowners' insurance policies, sustaining solid profitability in personal lines. Although pricing competition may rise as profitability improves, pressure on commercial lines, particularly property insurance rates, persists due to significant rate hikes from 2019 to 2023.

Despite the stable outlook, potential volatility from natural catastrophe events poses a risk to insurers, with annual insured losses exceeding $100 billion driven by secondary perils like convective storms, wildfires, and floods. As reinsurance attachment points have risen, primary insurers are retaining more risk, influencing their earnings and regulatory compliance efforts.

Moody’s anticipates a downward trend in property reinsurance rates, with a decline of up to 20% at the pivotal January 1, 2026 renewals. This anticipated reduction, supported by increased alternative capital inflows, could alleviate some margin pressures from decreasing primary property insurance pricing. Insurers might expand their reinsurance against severe perils through increased XoL protection limits, adopting strategic risk management approaches.

For U.S. casualty reserves, Moody’s warns that insurers heavily engaged in these lines may need to enhance reserves and adjust rates due to frequent litigation and rising settlement costs. Reserves have been reportedly adequate by the end of 2024, yet remain insufficient for long-tail general liability and commercial motor lines.

Globally, economic growth is expected to remain steady yet muted into 2026. Moody's projects annual global real GDP growth at 2.5% – 2.6% for 2026-27. Insurers across various regions are expected to benefit from reinvestment yields surpassing those of previous low-rate periods, as easing inflation moderates claims costs and operational expenses.