The deleveraging trend in the European insurance/reinsurance industry is bottoming out and could reverse over the next two years, Moody's said Jan. 26.

Financial leverage for the largest insurers/reinsurers in Europe stabilized at 23.8% after declining for six consecutive years from a peak of 32.8% in 2008, the rating agency said.

Moody's Associate Managing Director Antonello Aquino said the agency expects re/insurers to resume issuing "material amounts of hybrid debt" in 2017 to cushion their Solvency II capital ratios from market volatility, which include uncertainties related to Britain's exit from the EU and the outcome of elections in several European countries.

Moody's expects the industry to continue taking advantage of low interest rates to secure lower borrowing costs by refinancing maturing debt. The agency expects Tier 2 capital will continue to dominate new issuances, driven by the generally high Tier 2 capacity among large insurers.

The agency projects the portion of re/insurers' debt to equity to rise in 2017.