Ratings of insurers and reinsurers across Europe, the Middle East, and Africa (EMEA) showed improvement in 2025, according to a new report from AM Best, a credit rating agency specialising in the insurance sector.
The findings are presented in the report “Benchmarking EMEA Ratings – Improving Credit Quality, but Common Themes Highlighted as Weaknesses.”
AM Best notes that, despite continuing global geopolitical uncertainty, macroeconomic conditions remained relatively stable through 2024 and 2025, and profitability levels across many market segments were generally robust. These factors supported improvements in key balance sheet fundamentals for rated entities.
The report evaluates the composition of AM Best ratings across most insurers and reinsurers in the EMEA region, focusing on parent companies rather than subsidiaries, branches, or individual Lloyd’s syndicates, and details rating actions between the end of 2024 and the end of 2025.
Issuer Credit Ratings (ICRs), which represent AM Best’s independent opinion on a company’s ability to meet its financial obligations, show that in mature markets ratings largely cluster around the “a” and “a-” categories. In emerging markets, where country risk plays a greater role, ratings are more dispersed, averaging between “bbb-” and “bbb+.”
By the end of 2025, 87% of rating units maintained stable outlooks, with mature markets showing a slightly higher proportion of stability than emerging markets. Only 7% of ratings carried a negative outlook, a marked reduction from prior years of macroeconomic volatility.
Most rating improvements in 2025 centred on balance sheet strength. These were supported by stable capital generation, strong underwriting margins, and continued investment returns, reflecting the higher interest rate environment.
Country risk remains a key factor in assessments, with AM Best assigning countries to tiers from CRT-1, indicating the lowest risk, to CRT-5 for those with the highest risk. About half of rated entities operate in CRT-3 to CRT-5 countries, making this consideration especially relevant for emerging market insurers and reinsurers.
Balance sheet strength assessments show that most rated companies are Very Strong, although emerging market entities are more widely distributed due to higher country and investment risk. Risk-adjusted capitalisation, measured through AM Best’s proprietary Best’s Capital Adequacy Ratio (BCAR), indicates that over 90% of EMEA-rated entities fall within the Strongest category, though only a small fraction achieve the Strongest overall balance sheet assessment.
Operating performance assessments are generally Adequate or Strong. Mature market companies benefit from diversification, scale, and market position, whereas emerging market entities often depend heavily on investment income and reinsurer profit commissions. Volatility, inflation, and local economic conditions continue to influence performance in emerging markets.
Most companies have business profiles assessed as Neutral to Limited, with only a small number achieving Very Favourable ratings. Larger, diversified groups with a strong market presence tend to achieve higher assessments. Enterprise Risk Management (ERM) assessments indicate that mature market companies generally have Appropriate frameworks, with a few rated Very Strong.
Emerging market insurers and reinsurers are mostly in the Evolving category, reflecting early-stage risk management practices and reliance on third-party processes. Common weaknesses relate to stress testing, concentration, investment, and regulatory risks.
Ben Diaz-Clegg, Associate Director, Analytics, at AM Best, and author of the report, commented: “AM Best expects companies to improve their enterprise risk management approach constantly, as markets and regulations develop. A company’s failure to keep pace with the changing landscape and evolving risks and challenges may, over time, exert pressure on its assessment.”
