Moody’s Ratings maintains its stable outlook for the global property and casualty (P&C) insurance industry in 2026, with the rating agency expecting insurers to continue to generate good profitability and strong capital strength amid weak global economic growth.
The ratings agency revised the sector’s outlook to stable from negative in December 2024, citing improvements in personal line pricing adequacy, business line pricing remaining supportive of good performance, and strong investment income.
Today, Moody’s Ratings affirmed that its industry outlook for the year ahead remains stable and reiterated that profitability in both personal and commercial lines will remain solid.
Moody’s explains: “Cumulative pricing increases have improved margins on personal auto and homeowners insurance policies. This will help insurers maintain solid profitability in personal lines in 2026. However, pricing increases will gradually slow down as improved profitability will intensify pricing competition. Although pricing has declined in some commercial lines such as property and casualty insurance, rates remain quite adequate after large pricing increases in 2019-23 and will support good profitability in 2026.”
While the outlook points to another year of solid profits, Moody’s Ratings warned that weather events and U.S. casualties will remain a major source of volatility in airline earnings in the coming months.
Over the past five years, annual insured losses from natural disaster events have exceeded $100 billion due to so-called secondary hazards such as severe convective storms, wildfires and floods in recent years. Since the 2023 reset, when reinsurers no longer cover these risks, primary insurers have retained a greater share of losses as the reinsurance attachment point rises.
“We expect that insurers will continue to bear the majority of losses from secondary risks and will continue to be exposed to earnings volatility as reinsurers do not assume such risks,” Moody’s Ratings said. “Reinsurers are likely to remain firmly committed to the high attachment points of insurers’ excess of losses (XoL) treaties for renewal in 2026.”
While attachment points are expected to remain unchanged, property reinsurance rates fell 20% on the key renewal date of January 1, 2026, and Moody’s Ratings expects buyer costs to continue falling from recent peaks in 2026, brokers reported.
Moody’s Ratings explains: “As reinsurer profitability improves to strong levels, alternative capital inflows grow and competition among reinsurers intensifies. Falling reinsurance costs will ease the pressure on insurers’ margins from lower primary property insurance pricing. We expect some insurers to enhance reinsurance cover against high-severity major risks by increasing XoL cover limits. These developments, coupled with efforts to reduce exposure to catastrophe-prone areas, will slow insurance industry growth.” Insurers retain catastrophe losses. “
As for any potential increase in U.S. casualty reserves, Moody’s Ratings warned that insurers with significant casualty business in the country may need to increase their reserves and raise rates to offset more frequent litigation and higher settlement costs.
“We estimate that U.S. property and casualty insurers’ reserves are within a reasonably adequate range as of the end of 2024. However, they remain short-tailed in long-tail general liability and commercial auto lines,” the report said.
Moody’s Ratings cited Everest Group as an example of casualty risk after the company reported a significant decline in its Q3’25 earnings due to a $478 million charge due to adverse reserve developments in its U.S. casualty insurance and other businesses. However, the reinsurer took decisive action, choosing to sell all renewal rights for its US, UK, European and Asia-Pacific commercial retail insurance businesses to insurer AIG and striking a $1.2 billion counter-development reinsurance deal with Longtail Re.
As Moody’s Ratings points out, casualty accounts in the U.S. and Europe are also exposed to potential claims arising from policies put in place decades ago, as well as emerging risks, such as environmentally driven claims related to the use of per- and polyfluoroalkyl substances and microplastics.
Moody’s Ratings said: “In addition to raising rates, insurers are responding to rising claims costs due to social inflation by changing terms and conditions and reducing exposure to certain jurisdictions. Many insurers are also reinsuring a large portion of the policies they wrote in previous years through loss portfolio transfers or adverse development coverage.”
Finally, Moody’s Ratings expects global economic growth to be stable but weak in 2026, driven by policy differences and changes in trade. The firm expects global real GDP growth to hover between 2.5% and 2.6% in 2026-27, down from 2.6% in 2025.
“Insurers in most regions will continue to benefit from reinvestment yields that exceed levels seen in the low-interest-rate era, and a general easing in inflation will slow the growth of claims costs and other expenses.”
