Moody’s Ratings, an international credit rating agency specialising in credit assessments and financial research, has kept its outlook for Italy’s life and property and casualty (P&C) insurance sectors stable.
In a new report, the company said its assessment was unchanged from the previous year, citing stronger liquidity in life insurance, sustained underwriting profitability in P&C insurance and sound capital positions across the industry.
According to Moody’s, the life insurance sector recorded an improvement in cash flows during the first six months of 2026, as fewer policyholders surrendered their contracts and technical reserves continued to increase.
Although total life insurance premiums declined by 1.2% year on year, net inflows rose by 26.7% to €3.6 billion. The company said the reduction in policy withdrawals helped strengthen liquidity and ease pressure on insurers’ finances.
Moody’s expects the composition of life insurance business to continue changing, with unit-linked products accounting for a growing proportion of new policies. Unlike traditional savings products that guarantee returns, unit-linked policies place investment risk on policyholders and generally require less regulatory capital.
The company said this shift should reduce insurers’ exposure to guaranteed returns and lower capital demands, although it could also make fee income and new business performance more vulnerable to fluctuations in financial markets.
The distribution of life insurance products is another area facing structural change. Banks, post offices and financial advisers remain central to the sector, while consolidation among Italian banks is reshaping relationships between insurers and their distribution partners.
The company expects the effects to differ between providers. Insurers working with larger, financially stronger banking groups could gain access to wider distribution networks, while others may encounter greater competition or face renegotiations of existing agreements.
In the P&C market, Moody’s anticipates that underwriting results will remain strong in 2027, with non-motor insurance continuing to contribute significantly to earnings. The company linked the sector’s performance to earlier premium increases, fewer claims and limited catastrophe losses. Motor insurance profitability also improved during the first half of 2026, supported in part by adjustments to reserves set aside for claims from previous years.
Nevertheless, Moody’s expects profitability growth to moderate as the pace of premium increases slows and claims costs remain a constraint. Inflation in claims has declined from its 2023 peak, but prices for motor vehicle spare parts and construction materials continue to rise.
The company noted that greater severity of individual claims is increasingly offsetting the benefits of lower claims frequency. It therefore expects the sector to maintain solid underwriting performance in 2027, although margins may come under pressure.
New requirements for business catastrophe insurance are expected to provide further support for premium growth. Under legislation introduced through Italy’s 2024 budget law, businesses must insure certain assets against specified natural catastrophe risks. Moody’s expects the requirement to increase insurance uptake, particularly among small and medium-sized enterprises (SMEs), and contribute to growth in non-motor premiums.
The company reported that the number of SMEs holding the required insurance increased more than threefold between June 2025 and April 2026, reaching approximately 233,000. Despite this increase, only 15.8% of businesses covered by the mandate had obtained the required protection by April 2026.
Moody’s said wider adoption could expand the market but would also expose insurers to greater accumulation risk, whereby one catastrophe generates claims across numerous policies. This could be particularly significant in areas with high concentrations of insured assets.
Moody’s also highlighted the potential for considerable variation in catastrophe-related claims from year to year. The current-year loss ratio for Italy’s fire and natural elements insurance category, which covers fire, explosions and natural phenomena and is broader than the mandatory catastrophe insurance requirement, reached 222% in 2023 before falling to 56% in 2025. The company said insurers would need to maintain appropriate premiums, policy limits and reinsurance arrangements to manage the financial effects of major events.
Risks associated with asset-liability management and claims reserving remain manageable. In life insurance, the move towards unit-linked and hybrid products is gradually reducing exposure to policies with guaranteed returns. The company expects this trend to continue while financial market volatility remains moderate. In P&C insurance, earnings are increasingly being generated through current underwriting activity rather than releases from reserves established in previous years.
However, Moody’s noted that insurers remain exposed to changes in interest rates and sovereign bond spreads. Although Italian insurers have reduced their holdings of domestic government debt, movements in bond yields can still affect the value of their investment portfolios, particularly in the life insurance segment.
The broader economic outlook is expected to provide some support for the industry. Moody’s cited the Bank of Italy’s forecast for Italian gross domestic product (GDP) growth of around 0.4% in 2027, indicating continued but limited economic expansion. Inflation is expected to remain close to 2%, while stable employment and moderate price growth should help sustain insurance demand and contain increases in claims costs.
Interest rates nevertheless remain an important consideration. Moody’s said higher rates can improve investment returns and the profitability of newly written business, but may also make bank deposits more attractive to customers and increase competition for savings. In addition, rising yields can result in unrealised losses on insurers’ fixed-income investments. The company added that higher energy prices have contributed to uncertainty surrounding the future direction of interest rates.
Capital adequacy remains a key strength for Italian insurers, with Moody’s reporting generally high solvency ratios and own funds that are largely of good quality. The company expects changes to the Solvency II regulatory framework, scheduled to apply from January 2027, to reduce capital requirements for some insurers, particularly those with long-term liabilities. The revised framework is also expected to support reported solvency ratios on average.
Despite these potential benefits, Moody’s expects additional requirements covering liquidity, climate-related risks and regulatory reporting to increase compliance expenditure and operational demands. Insurers will therefore need to balance the benefits of regulatory changes against the costs of meeting enhanced supervisory expectations.
