Moody’s Ratings has maintained its stable outlook on the global property and casualty (P&C) insurance sector for 2026, with the rating agency expecting carriers to continue to generate good profitability and strong capitalisation against a backdrop of subdued global economic growth.
The ratings agency revised its outlook on the sector to stable from negative back in December 2024, at the time citing improved personal lines pricing adequacy, commercial lines pricing remaining supportive of good results, and strong investment income.
Today, Moody’s Ratings has confirmed that its sector outlook remains stable for the year ahead, reiterating that both personal and commercial lines’ profitability will remain solid.
Moody’s explains: “Cumulative pricing increases have improved profit margins for personal motor and homeowners insurance policies. This will help insurers sustain solid profitability for personal lines in 2026. However, pricing increases will taper off because improved profitability will increase pricing competition. Despite declining pricing for some commercial lines, such as property insurance, rates are still quite adequate following significant pricing increases during 2019-23 and will support good profitability in 2026.”
While the outlook points to another year of solid profitability, Moody’s Ratings warns that weather events and the US casualty landscape remain key sources of earnings volatility for carriers in the months ahead.
Over the past five years, annual insured losses from natural catastrophe events have exceeded $100 billion, driven in recent years by so-called secondary perils such as severe convective storms, wildfires, and floods. Since the reset in 2023, when reinsurers moved away from these exposures, primary insurers have retained a greater share of the losses as reinsurance attachment points rose.
“We expect that insurers will continue to retain a large proportion of losses from secondary perils and will remain exposed to earnings volatility as reinsurers refrain from taking on such risks,” says Moody’s Ratings. “Reinsurers are likely to stand firm on high attachment points for insurers’ excess of loss (XoL) treaties for 2026 renewals.”
While attachment points are expected to hold, property reinsurance rates declined by up to 20% at the key January 1st, 2026, renewals, according to broker reports, and Moody’s Ratings expects costs for buyers to continue to come down in 2026 from their recent peak.
Moody’s Ratings explained: “Competition among reinsurers has intensified as their profitability has improved to strong levels, with alternative capital inflows growing. Declines in reinsurance costs will mitigate pressure on insurers’ margins from falling pricing for primary property insurance. We expect some insurers to increase their reinsurance protection against high-severity major perils by raising their XoL protection limits. These developments, along with efforts to reduce exposure to catastrophe-prone areas, will moderate growth in insurers’ retained catastrophe losses.”
In terms of any potential increases in US casualty reserves, Moody’s Ratings warns that insurers with significant exposure to casualty lines of business in the country might need to bolster their reserves and increase rates to offset more frequent litigation and higher settlement costs.
“We estimate that P&C insurers’ reserves in the US were in a reasonable range of adequacy as of the end of 2024. However, they continue to be deficient for long-tail general liability and commercial motor lines,” says the report.
Moody’s Ratings uses Everest Group as an example of the casualty risk, after the firm reported a notable dip in Q3’25 earnings due to a $478 million charge related to an adverse reserve development for its US casualty insurance and other businesses. However, the re/insurer took decisive action, opting to sell all of the rights to renew its US, UK, European, and Asia Pacific Commercial Retail Insurance businesses to insurer AIG, as well as entering into a $1.2 billion adverse development reinsurance transaction with Longtail Re.
As noted by Moody’s Ratings, casualty books in both the US and Europe are also exposed to latent claims stemming from policies written decades ago, as well as emerging risks such as environmentally driven claims related to the use of per- and polyfluoroalkyl substances, and microplastics.
“In addition to raising rates, insurers are responding to rising claims costs caused by social inflation by changing terms and conditions and reducing exposure to certain jurisdictions. Many insurers also reinsure substantial proportions of their policies written in prior years through loss portfolio transfers or adverse development covers,” says Moody’s Ratings.
Lastly, Moody’s Ratings expects global economic growth to be steady but subdued in 2026, driven by policy divergence and trade shifts. The firm projects that global real GDP growth will hover at 2.5% – 2.6% annually in 2026-27, down from 2.6% in 2025.
“Insurers in most regions will continue to benefit from reinvestment yields that exceed levels during the low-rate era, and generally easing inflation will slow growth in claims costs and other expenses.”
