Total available capital for insurers rated by S&P Global Ratings climbed to roughly $5.0 trillion at year-end 2025, up from $4.9 trillion a year earlier, according to a new report from S&P Global Ratings. The report, published in 2026, finds that despite heightened geopolitical instability and financial market turbulence, global insurance capital adequacy reached record highs in 2025, with capital redundancy staying well above the 99.80% confidence level—what S&P calls "substantial stress." The firm expects these strong capital buffers will position the sector well to absorb ongoing volatility, though a modest deterioration is likely in 2026.
The report breaks down capital strength by region, showing broad-based resilience across the globe. In North America, strong retained earnings drove capital growth, though a tougher outlook for U.S. health insurance—facing rising medical cost trends and utilization pressures—partially offset that strength. European insurers demonstrated disciplined underwriting, muted premium growth, and relatively steady capital formation. Asia-Pacific saw more measured capital growth, supported by improving underwriting trends and a gradual recovery in investment income. Latin American insurers maintained broadly stable capital adequacy amid improving operating conditions, adequate underwriting, and moderating inflation, despite sovereign risk constraints and modest economic growth in several markets. Global reinsurance capital reached a record $785 billion at year-end 2025, with the sector entering 2026 with capitalization projected to remain redundant at the 99.99% confidence level—"extreme stress" territory.
The report finds that S&P upgraded 43 insurance groups in 2025 and revised 31 outlooks to positive, reflecting sustained operating performance and balance-sheet strength driven by underwriting discipline, pricing adequacy, and higher reinvestment yields. However, the firm also downgraded 15 insurance groups and revised 17 outlooks to negative, primarily due to company-specific factors like execution challenges, reserve pressures in casualty lines, or weak capitalization relative to peers rather than systemic stress. Many rated insurers reported solid earnings and underwriting margins last year, the report says.
S&P expects a marginal tightening of capital adequacy globally in 2026 as projected shareholder distributions and capital allocations for growth slightly outpace earnings in its base case. This dynamic is most evident in the U.S., where capital returns remain elevated—the report notes that insurers will likely emphasize shareholder returns in 2026 through dividends and share buybacks in the absence of strong organic growth prospects. European and Asia-Pacific insurers are likely to maintain a more balanced approach to capital management, according to the analysis. The report points to specific pressure points: U.S. health insurers face a multiyear recovery effort with limited repricing flexibility due to competitive and regulatory factors, while medical costs remain elevated. In Asia-Pacific, diverging total available capital growth and rising capital requirements will likely compress capital buffers amid shareholder distributions, shifting asset allocations, and mergers and acquisitions in some markets. For Latin America, prolonged inflation risks are weighing on underwriting performance as rising prices for auto parts, medical equipment, and medicine push up claims costs, though price increases are mitigating these factors.
The report concludes that global reinsurers' earnings are likely to stay above their cost of capital in 2026, with resilient underwriting margins and strong investment income supporting capital adequacy. However, it warns that elevated natural catastrophe exposures and premium rate declines in short-tail lines mean underwriting profitability may come under increasing pressure as competition intensifies. For the broader insurance sector, geopolitical risks like the Middle East war have added volatility to specialty lines' 2026 earnings, though the impact has been largely contained within earnings so far. The bottom line: insurers enter a period of elevated uncertainty from a position of strength, but capital buffers are expected to shrink modestly as companies balance growth, shareholder returns, and earnings pressures across diverse global markets.