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European Insurance Outlook 2025

The current geopolitical landscape presents risks for capital markets, particularly due to ongoing wars in Europe. 

The European insurance sector, with approximately €11 trillion in investments, is exposed to such capital market risks. 

While risks such as muted economic growth and real estate concerns have decreased, structural risks like climate change and cyber threats remain. 

Life insurers face competition from banks offering attractive deposit rates, limiting top-line growth, but their existing business remains stable. 

The Return on Assets for major European life markets is expected to remain stable in 2025. 

In the non-life segment, claims inflation is outpacing consumer price increases, necessitating premium rate hikes, especially due to rising costs of car parts and labor. 

Despite challenges from natural catastrophes, reserve adequacy for rated insurers remains strong. 

Capital adequacy is a key strength for European insurers, with a robust surplus exceeding €100 billion anticipated for 2025. Factors supporting this surplus include bond investments, IFRS 17 transparency, and updates to our risk-based capital adequacy framework. 

The quality of capital remains stable, with a significant portion in shareholders' equity and a positive net unrealized capital gains position. 

Cyber risks present both challenges and opportunities, with premiums growing despite cautious underwriting. 

Climate change remains a critical issue, necessitating premium increases, particularly in regions vulnerable to natural disasters, potentially requiring public-private partnerships for affordability. 

Regulatory updates, including Solvency II and IFRS 17, are expected to provide marginal capital relief without impacting ratings.

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