Fitch’s outlook for global insurance sector is ‘neutral’ despite pockets of deterioration

Fitch Ratings has assigned a ‘neutral’ global sector outlook for the insurance industry in 2026, which reflects a stable operating environment in most markets and a sector that remains resilient, despite facing increasingly challenging conditions in specific markets.

While the broader picture remains stable, the rating agency noted that there are pockets of deterioration that remain limited to the UK London Market, global reinsurance, US Health, and Mexico, as well as the life insurance markets in China and Taiwan.

“We expect underwriting margins and investment yields to peak or begin to fall in 2026 from healthy levels in 2025, while volume growth is likely to be more muted. This explains the negative outlook revisions across Europe and in commercial and specialty insurance sectors,” said Harish Gohil, Global Head of Insurance.

Reflecting these expectations, Fitch revised the outlook for the UK London Market to ‘deteriorating’, from ‘neutral’, a shift that reflects expectations of weaker underwriting margins after significant rate softening since 2025.

Meanwhile, the sector outlooks for Italy life and Germany non-life were revised to ‘neutral’ from ‘improving’ reflecting the agency’s view that business volume growth will slow in 2026 and profitability will remain stable.

Fitch revised its 2026 outlook for the global reinsurance sector to ‘deteriorating’ in September, as underlying operational and business conditions are likely to worsen from the prior year.

In the US, the Health sector remains on a ‘deteriorating’ outlook, driven by persistent, elevated medical cost trends.

However, most other US and APAC insurance markets retained a ‘neutral’ outlook, supported by stable operating margins, prudent asset-liability management and strong solvency buffers.

This year, Fitch initiated sector outlooks for selected emerging markets in EMEA. Saudi Arabia stands out with an ‘improving’ outlook for non-life, underpinned by expectations of rising improving underwriting profitability in 2026 from a weak base in 2025.

The outlook was revised to ‘deteriorating’ for Mexico due to weaker financial performance and capitalisation arising from changes to the Revenue Law.

Fitch highlighted that the markets should closely monitor deflating asset prices, financial market volatility and higher-than-expected default rates, as they could hamper financial profiles through investment losses.

The market should also watch for monetary policy, as while easing will lead to lower investments yields, the adverse effect would be gradual; and increasing exposure to illiquid assets in some life insurance markets.

Another heading that Fitch advises to closely monitor are regulatory developments, such as increased scrutiny of asset-intensive reinsurance, the Solvency II review in the EU and the introduction of the economic-value-based solvency regime in Japan and Taiwan.