Moody’s Ratings, a credit ratings and risk analysis agency, has published findings from its annual survey of chief financial officers across 27 leading European re/insurers.
Moody’s reports that the European insurance sector in 2026 is primarily focused on macroeconomic uncertainty, with competitive pressures and geopolitical risk also ranking highly.
Despite this cautious backdrop, Moody’s notes that capital strength across the industry remains solid, with continued confidence in balance sheets and investment capacity.
Moody’s states that macroeconomic uncertainty is the most frequently cited concern among CFOs, identified by around two-thirds of respondents.
Competitive pressure follows closely, with 63% highlighting increasingly intense rivalry across markets that is limiting pricing power and putting pressure on margins, even though overall profitability expectations remain broadly steady. Geopolitical risk is also a key concern, reflecting ongoing instability and its influence on strategic decision-making.
According to Moody’s, insurers continue to show a strong willingness to deploy surplus capital. Around 58% of CFOs plan to allocate excess capital, while 31% intend to maintain current levels and just 12% expect to increase capital buffers. Planned uses include investment in new business, share buybacks, mergers and acquisitions, and dividend payments. This approach is underpinned by expectations that reforms to Europe’s Solvency II framework will strengthen solvency positions, with around 60% of respondents anticipating a positive impact.
Moody’s reports that investment strategies remain largely unchanged overall. Around 70% of CFOs expect to maintain their current exposure to illiquid and higher-risk assets over the next two to three years, while about one-fifth plan a modest increase. Private credit and infrastructure stand out as the most attractive areas for incremental allocation, driven by yield and diversification benefits. Real estate is the asset class most commonly expected to see reductions, although some insurers still plan limited increases.
Moody’s also highlights a growing emphasis on technology investment, particularly in modernising core systems and infrastructure. Nearly two-thirds of CFOs are prioritising upgrades to legacy platforms in order to improve efficiency and support advanced analytics and artificial intelligence. Adoption of AI is accelerating, especially in underwriting, claims management and fraud detection, although Moody’s notes that legacy systems remain a significant constraint on wider implementation.
Profitability expectations remain stable, according to Moody’s. Following strong results in 2025, most CFOs expect either flat or moderately higher operating profits in 2026. Around 46% anticipate stable earnings, while another 46% expect growth of 5–10%, and none expect a decline. Investment returns are also expected to remain resilient, supported by relatively high yields even as short-term interest rates ease.
In life insurance, Moody’s observes that revenue is expected to be supported by existing long-term portfolios, with additional growth potential from savings and retirement products. Structural drivers remain important, particularly in the UK bulk purchase annuity market and ongoing pension reforms in the Netherlands. In property and casualty insurance, premium growth is expected to slow as pricing stabilises after several years of strong increases.
Moody’s notes that claims inflation is expected to remain broadly manageable, with most CFOs anticipating stable severity levels. However, some concerns remain that geopolitical developments, including tensions in the Middle East, could place upward pressure on costs, particularly through energy prices and supply chain disruption. Insurers generally expect to offset claims inflation through pricing, although the balance between price increases and claims growth is becoming more finely matched.
Competitive conditions remain a central theme across the sector. Moody’s reports that pricing environments have become more challenging following several years of strong rate increases, particularly in property and casualty insurance. In life insurance, increased competition in areas such as bulk purchase annuities, including from alternative asset managers, is contributing to margin pressure.
Capital management remains focused on flexibility and shareholder returns. Moody’s notes that share buybacks are becoming an increasingly important mechanism for capital distribution, while dividend policies remain relatively stable due to established commitments. Mergers and acquisitions activity is expected to continue, although most insurers are taking a selective approach, focusing on consolidation opportunities rather than large-scale expansion.
Regulatory developments are also shaping expectations.
Moody’s highlights that reforms to the Solvency II framework, expected to take effect in 2027, are likely to provide moderate capital relief for many insurers. While most respondents expect a positive impact on solvency ratios, the majority anticipate only limited improvements, with relatively little expectation that additional capital will be redirected into broader real economy investment.
On asset allocation, Moody’s reports continued interest in private credit, which is favoured for its yield and diversification characteristics. Exposure to public equities is expected to rise modestly, supported in part by regulatory changes that reduce capital charges on long-term equity holdings. Real estate allocations are expected to remain broadly stable overall, with no significant shift anticipated.
Moody’s concludes that artificial intelligence is expected to deliver gradual improvements across the sector. Insurers anticipate efficiency gains in underwriting, claims handling and fraud detection, although its impact on product development is expected to be more limited. Overall, AI is viewed as an enabling development rather than a disruptive force, with benefits expected to build steadily over time rather than produce immediate structural change.
