A new report from Fitch Ratings reiterated its “deteriorating” outlook for the global reinsurance and London market sectors, saying a softening in the pricing cycle will have a more severe impact.
Fitch said in a new report that despite a tougher macroeconomic backdrop, the global insurance industry outlook remains “neutral” through mid-2026, supported by generally resilient business conditions in most markets, but the outlook for some non-life insurance segments is approaching “deterioration.”
The shift reportedly reflects the relatively high inflationary pressures and weaker economic growth faced by life insurance companies relative to them.
The ratings agency continued, “We expect non-life underwriting margins to face pressure from weaker revenue growth, slower pricing momentum and a modest increase in claims inflation, partially offset by lower reinsurance prices and lower claims frequency due to weaker economic activity.
“Commercial and professional lines appear to be more exposed than personal lines, although dynamics at a national level are different, with insurers tending to have greater pricing power.
“If the global economic slowdown following the outbreak of the Iran war becomes more pronounced than we currently expect, non-life insurance revenues may be lower than we expect, adding to the industry’s pricing challenges.
“Margin pressures are also likely to intensify in markets where loss cost inflation rises sharply and suddenly, and provisions in some long-tail businesses could experience adverse developments if claims inflation is higher than we expect.
“In addition, major insurers’ underwriting results are impacted by high-frequency natural catastrophe risks and their retention rates remain high.”
At the same time, Fitch sees life insurers as net beneficiaries of the modest and gradual rise in interest rates and reinvestment yields expected in some global markets this year.
The rating agency noted that fee income should remain stable in the second half of the year, supported by a structural shift toward capital-light products, but remain sensitive to short-term market movements.
It also expects continued flows into savings and retirement products, supported by demographic and regulatory trends such as pension risk transfers.
“We expect only a modest increase in insurance lapse rates and weaker new business volumes due to increased risk aversion among policyholders,” the company added.
Fitch continues, “Most life insurers have limited direct exposure to financial market fluctuations. Investment risk is increasingly borne by policyholders, with duration and market risk declining in recent years. Investment guarantees to customers are primarily backed by high-rated bonds with similar maturities, held to maturity.
“However, we believe that increasing allocations to more complex, less liquid assets in some jurisdictions could exacerbate the risk of losses during a downturn in credit markets. A sharp rise in credit defaults and government bond yields, triggering broader risk aversion and higher default rates, would also have a negative impact on the life insurance industry, but the likelihood of this happening in 2026 is low.”
Fitch maintains “neutral” on most outlooks for the insurance sector through 2026, reflecting generally stable conditions across the market.
However, pressures are increasingly concentrated in a few areas where pricing cycles, inflation dynamics and macro-financial conditions are becoming less supportive.
The outlook remains “worsened” for several sectors, including global reinsurance and the UK London market, where softer pricing is starting to have a greater impact on results, and US health insurance, where margin recovery is expected to remain limited in 2026 due to ongoing legislative and regulatory uncertainty.
In Asia Pacific, the softer outlook is largely confined to life insurance markets in China and Taiwan, reflecting volatility related to low interest rates and rising equity risks in the former, and unresolved currency and capital constraints in the latter.
In Latin America, the outlook for Mexico’s life and non-life insurance sectors remains “worsened” due to continued claims pressure and falling short-term government bond yields.
