Ratings of insurers and reinsurers in Europe, the Middle East and Africa (EMEA) will improve in 2025, according to a new report from AM Best, a credit rating agency specializing in the insurance industry.
The findings are published in the report “Europe, Middle East and Africa Rating Benchmarks – Improving credit quality, but common themes highlighted as weaknesses”.
AM Best pointed out that despite continued global geopolitical uncertainty, macroeconomic conditions remain relatively stable in 2024 and 2025, with profitability levels generally strong in many market segments. These factors support improvements in the rated entities’ key balance sheet fundamentals.
The report assesses the AM Best rating makeup of most insurers and reinsurers in the EMEA region, focusing on parent companies rather than subsidiaries, branches or individual Lloyd’s groups, and details rating actions between the end of 2024 and the end of 2025.
Issuer Credit Ratings (ICRs) represent AM Best’s independent opinion on a company’s ability to meet its financial obligations, indicating that ratings in mature markets are primarily concentrated in the “a” and “a-” categories. In emerging markets, where country risk plays a larger role, ratings are more dispersed, averaging between “bbb-” and “bbb+.”
As of the end of 2025, 87% of rating units maintained a stable outlook, with the stable proportion in mature markets slightly higher than in emerging markets. Only 7% of the rating outlooks are negative, which is significantly less macroeconomic fluctuations than in previous years.
Much of the rating improvement in 2025 is focused on balance sheet strength. These are supported by stable capital generation, strong underwriting margins and sustained investment returns, reflecting the higher interest rate environment.
Country risk remains a key factor in the assessment, with AM Best classifying countries into levels CRT-1, indicating the lowest risk, to CRT-5, indicating the highest risk. Approximately half of rated entities operate in CRT-3 to CRT-5 countries, making this consideration particularly important for emerging market insurers and reinsurers.
The balance sheet strength assessment shows that most rated companies are rated “very strong”, although emerging market entities are more widely spread due to higher country and investment risks. Risk-adjusted capital, measured by AM Best’s proprietary Best Capital Adequacy Ratio (BCAR), shows that more than 90% of EMEA rated entities are in the Strongest category, but only a small proportion achieve the Strongest overall balance sheet assessment.
Operational performance is typically assessed as “adequate” or “good.” Mature market companies benefit from diversification, scale and market position, while emerging market entities tend to rely heavily on investment income and commissions on reinsurer profits. Volatility, inflation and local economic conditions continue to impact emerging market performance.
The business profiles of most companies are assessed as Neutral to Limited, with only a few receiving very favorable ratings. Larger, diversified groups with strong market presence tend to receive higher evaluations. Enterprise risk management (ERM) assessments indicate that companies in mature markets generally have appropriate frameworks in place, with some rated “very strong.”
Emerging market insurers and reinsurers mostly fall into the evolving category, reflecting early 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 of analytics at AM Best and author of the report, commented: “AM Best expects companies to continually improve their enterprise risk management approaches as markets and regulations evolve. If companies fail to keep up with the changing landscape and evolving risks and challenges, this could put pressure on their assessments over time.”
