Fitch Ratings has affirmed a ‘neutral’ outlook for the European insurance sector at mid-year 2025, citing stable operating conditions despite increased financial market volatility and a weakening economic backdrop.
The agency maintained neutral outlooks for both life and non-life insurance segments across most European markets.
Exceptions include Italy’s life sector and Germany’s non-life segment, which continue to show improving trends.
For life insurers, Fitch expects steady net inflows into savings products, supported by declining yields from alternative savings options such as bank deposits.
The agency noted that most investment risks remain with policyholders, limiting insurers’ direct exposure to market fluctuations.
Investment guarantees are primarily backed by high-grade, long-duration bonds that insurers typically hold to maturity.
However, Fitch warned of potential credit risk if economic conditions deteriorate, particularly in alternative and illiquid assets. UK life insurers remain more exposed to these asset classes.
In the non-life sector, Fitch noted the pricing cycle has reached its peak in most markets but anticipates rate adequacy through the remainder of 2025. While weaker economic growth could limit premium growth, it may also help reduce claims frequency.
Fitch highlighted that European insurers face limited direct exposure to the U.S. economy and dollar-related risks, with second-order effects from U.S. tariffs posing the greater concern.
In particular, trade-related inflation could raise claims costs in non-life lines, especially for motor parts and construction materials. The most vulnerable are global reinsurers and London market carriers with substantial U.S. exposure.
