Credit rating and risk analysis agency Moody’s Ratings has announced the results of its annual survey of chief financial officers of 27 leading European re/insurance companies.
Moody’s report stated that the European insurance industry will mainly focus on macroeconomic uncertainty in 2026, with competitive pressure and geopolitical risks also ranking high.
Despite this cautious backdrop, Moody’s noted that the capital strength of the industry as a whole remains solid, with confidence in balance sheets and investment capabilities remaining.
Moody’s said macroeconomic uncertainty was the most commonly cited concern among CFOs, cited by about two-thirds of respondents.
This is closely followed by competitive pressure, with 63% of respondents highlighting that while overall earnings expectations remain broadly stable, increasing competition among markets is limiting pricing power and putting pressure on margins. Geopolitical risk is also a key issue, reflecting continued instability and its impact on strategic decision-making.
Moody’s said insurers continue to demonstrate a strong willingness to deploy remaining capital. About 58% of CFOs plan to allocate excess capital, 31% intend to maintain current levels, and only 12% expect to increase capital buffers. Planned uses include investments in new businesses, share buybacks, mergers and acquisitions, and dividend payments. This approach is based on expectations that reforms to the European Solvency II framework will strengthen solvency positions, with around 60% of respondents expecting a positive impact.
Moody’s reported that investment strategies generally remained largely unchanged. About 70% of CFOs expect to maintain current exposure to illiquid and risky assets over the next two to three years, while about one-fifth plan to increase modestly. Private credit and infrastructure emerged as the most attractive areas for incremental allocations, driven by yield and diversification benefits. Real estate is the asset class most widely expected to decline, although some insurers still plan for limited increases.
Moody’s also highlighted an increasing focus on technology investments, particularly in modernizing core systems and infrastructure. Nearly two-thirds of CFOs are prioritizing upgrading legacy platforms to improve efficiency and support advanced analytics and artificial intelligence. Adoption of artificial intelligence is accelerating, particularly in underwriting, claims management and fraud detection, although Moody’s notes that legacy systems remain a significant limitation to wider implementation.
Moody’s said earnings expectations remained stable. Following strong results in 2025, most CFOs expect operating profits to be flat or slightly higher in 2026. About 46% expect stable earnings, another 46% expect earnings to grow 5-10%, and no one expects earnings to decline. Even as short-term interest rates fall, investment returns are expected to remain resilient, helped by relatively high yields.
In the life insurance segment, revenue is expected to be supported by existing long-term investment portfolios, as well as additional growth potential from savings and retirement products, Moody’s noted. Structural drivers remain important, particularly in the UK bulk annuity market and the ongoing pension reform in the Netherlands. In property and casualty insurance, premium growth is expected to slow as pricing stabilizes after several years of strong growth.
Moody’s noted that claims inflation is expected to remain generally manageable, with most CFOs expecting severity to remain stable. However, some remain concerned that geopolitical developments, including tensions in the Middle East, could put upward pressure on costs, particularly through energy prices and supply chain disruptions. Insurers generally want to offset claims inflation through pricing, although the balance between rising prices and claims growth is becoming ever tighter.
Competitive conditions remain a central theme across the industry. Moody’s reports that after several years of strong rate increases, the pricing environment has become more challenging, particularly in property and casualty insurance. In life insurance, increased competition in areas such as bulk-buy annuities, including from alternative asset managers, is adding to margin pressure.
Capital management remains focused on flexibility and shareholder returns. Moody’s notes that share buybacks are becoming an increasingly important capital allocation mechanism, while dividend policy remains relatively stable due to established commitments. Although most insurers are taking a selective approach, focusing on consolidation opportunities rather than large-scale expansion, M&A activity is expected to continue.
Regulatory developments are also shaping expectations.
Moody’s highlighted that reforms to the Solvency II framework, expected to take effect in 2027, are likely to provide modest capital relief for many insurers. While most respondents expect solvency ratios to be affected positively, most expect only limited improvement, with relatively few expecting additional capital to be redirected to investment in the wider real economy.
On the asset allocation front, Moody’s reported continued interest in private credit, favored for its yield and diversification characteristics. Exposure to public equities is expected to rise slightly, in part due to regulatory changes that reduce capital requirements for long-term holdings. Real estate allocation is expected to remain broadly stable overall, with no major changes expected.
Moody’s concluded that artificial intelligence is expected to gradually improve the entire industry. Insurers expect efficiencies in underwriting, claims processing and fraud detection to improve, although the impact on product development is expected to be more limited. Overall, AI is viewed as a facilitative development rather than a disruptive force, with benefits expected to accrue steadily over time rather than produce immediate structural changes.