2025 Insurance Year in Review and 2026 Developments

Sector Financial Performance

Despite strong bottom-line financial performance, the insurance industry's performance in the financial markets diverged from the broader equity market in 2025. While the S&P 500 delivered a total return of approximately 17.9 percent for the year, the S&P Insurance Select Industry Index underperformed, returning approximately 8.1 percent for the full year, less than half the S&P 500's gain. ^{13, 14} This underperformance was driven in part by elevated catastrophe losses in the first half of the year, particularly from the Southern California wildfires, as well as investor concerns around casualty reserve adequacy and geopolitical uncertainty. The divergence from the broader market recalls patterns seen in 2023, when industry-specific headwinds similarly weighed on insurance equities.

The broader market's strong performance was again concentrated among large-cap technology stocks. The Magnificent Seven accounted for 42.5 percent of the S&P 500's gains in 2025, though only 2 of the 7 stocks, Alphabet and Nvidia, outperformed the index, reflecting a maturing AI investment cycle and more selective investor behavior. ^{15, 16} Significant market volatility occurred in April 2025, when the announcement of broad reciprocal tariffs on April 2 triggered a 15 percent drawdown in the S&P 500 and pushed the Chicago Board Options Exchange, Inc., Volatility Index to 60.1, the highest level since the early pandemic period. Markets recovered over the following 2 months, but the episode highlighted the sensitivity of equity valuations to trade policy shifts.

Valuation metrics for insurance companies were mixed in 2025. The sector traded at an average price-to-earnings ratio of approximately 12.1x, below the 3-year average of 18.2x, suggesting that investor sentiment remained cautious despite strong operating results. Market capitalization changes varied by subsegment, as discussed in the sections that follow.

S&P 500 Versus S&P Insurance Select Industry Index

Source: Data provided by CapitalIQ.

Life, Health, and Annuity

The life and annuity sectors set new records in 2025, buoyed by persistently elevated interest rates during the first three quarters of the year and sustained consumer demand for savings-oriented products. Total US retail annuity sales reached $464.1 billion for the full year, a 7 percent increase over 2024's $432.4 billion, marking the fourth consecutive year of record sales. ¹⁷ Quarterly results were strong throughout the year, with third-quarter sales of $121.2 billion representing the highest quarterly total ever recorded and the eighth consecutive quarter exceeding $100.0 billion. ¹⁸ Fixed-rate deferred annuities grew 6 percent to $165.3 billion, while fixed indexed annuities reached $127.9 billion, and registered index‑linked annuities set a new record of $79.6 billion. ¹⁹

The health insurance segment experienced significant premium rate increases in 2025, driven by rising medical utilization and escalating healthcare costs. Employer-sponsored family health insurance premiums rose 6 percent to an average of $26,993, marking the third consecutive year of increases at or above 6 percent, a pace not seen in 2 decades. ²⁰ In the Affordable Care Act (ACA) individual marketplace, the median proposed rate increase was 7 percent for 2025, with even steeper increases expected in 2026 as enhanced premium tax credits face potential expiration. ²¹ These rate increases reflected persistent pressure from healthcare labor shortages, higher provider reimbursement demands, and elevated medical utilization, particularly in Medicare Advantage, where managed care companies saw margin compression from a combination of rising costs and lower-than-expected government reimbursement. UnitedHealth Group, the largest US health insurer, reported full-year 2025 revenues of $447.6 billion, a 12 percent increase, but earnings per share declined significantly as medical costs outpaced premium growth. ²²

Life insurance new annualized premiums also reached a record $17.5 billion in 2025, a 10 percent year-over-year increase, with the policy count rising 7 percent. ²³ Growth was broad-based across product lines: Whole life premiums increased 7 percent to $6.4 billion, maintaining 37 percent market share; indexed universal life (IUL) premiums surged 17 percent to a record $4.5 billion, representing 25 percent of the market; and variable universal life (VUL) premiums grew 17 percent to $2.6 billion. ²⁴ The Federal Reserve's three rate cuts in the fourth quarter did not significantly dampen sales momentum, as consumers sought to lock in guarantees ahead of anticipated further easing.

Major life insurers reported strong financial results. New York Life posted earnings of $3.6 billion, a 4 percent increase, and declared a record $2.8 billion dividend to policyholders. Securian Financial reported record core earnings of $362 million, a 27 percent increase, driven by favorable mortality experience and disciplined expense management. ^{25, 26}

Looking ahead, the Life Insurance Marketing and Research Association (LIMRA) projects total annuity sales to remain above $450 billion annually through 2026, with indexed products expected to continue driving growth. Life insurance new premiums are forecast to grow between 2 and 6 percent in 2026, with IUL expected to lead at 8–12 percent growth, moderating from the strong 2025 pace. ^{27, 28} However, rising unemployment and weaker consumer confidence entering 2026 could temper demand, particularly in discretionary savings products. Globally, life premiums in advanced markets are expected to rise 1.8 percent in 2026, while emerging markets such as China, India, and Latin America are projected to achieve growth of approximately 5.7 percent. ²⁹

On the health side, managed care companies face continued headwinds from Medicare Advantage margin compression, with headwinds estimated at more than $90 per member per month in total impact from elevated utilization and lower-than-expected government reimbursement. ³⁰ The broader healthcare sector finished 2025 up approximately 14.6 percent, slightly trailing the S&P 500, but this gain was driven primarily by biopharma firms, with managed care stocks significantly underperforming due to margin pressures, rising medical costs, and uncertainty around federal reimbursement policy. ^{31, 32}

The life and health sector's average US valuation multiples trended modestly upward through 2025, while market capitalization showed fluctuations before moderating, as detailed in the chart.

Life and Health Average Market Cap and Median EBITDA Multiple Trends over 2025 (Market Capitalization in Millions)

Source: Data provided by CapitalIQ.

P&C

The US P&C insurance sector posted its strongest underwriting result in over a decade in 2025, with a net underwriting gain of approximately $60.9 billion and a combined ratio of 92.9 percent, compared to $22.1 billion in 2024. ³³ The improvement was driven by continued rate adequacy across most commercial lines, disciplined underwriting, and a benign US hurricane season. Pretax operating income was further supported by rising net investment income, as the elevated interest rate environment persisted through most of the year.

Global insured natural catastrophe losses totaled approximately $107 to $129 billion in 2025, depending on the source, marking the sixth consecutive year above $100.0 billion. ³⁴ The Southern California wildfires in January accounted for an estimated $40 billion in insured losses, making them the costliest wildfire event in recorded history. Severe convective storms produced approximately $50 billion in global insured losses, the third-costliest year on record for this peril type. Notably, secondary perils including wildfires, severe convective storms, and flooding accounted for a record 92 percent of total global insured catastrophe losses, reinforcing the need for improved modeling and risk selection in these categories. Domestically, the Central Texas flooding in early July was among the deadliest weather events, and a record $21 billion of weather disasters occurred throughout the year.

In commercial lines, rate trends were mixed across segments. Commercial property rates softened throughout 2025, declining approximately 4 percent for the year as improved capacity and favorable loss experience allowed buyers to negotiate more competitive terms. Global commercial insurance rates also trended downward, declining in each quarter of 2025. ³⁵ In contrast, casualty rates continued to increase for the year, rising approximately 12 percent overall, with rates excluding workers compensation up 7–11 percent. General liability rates increased from 4 percent in the first quarter to 7.2 percent by year-end, the sharpest acceleration among casualty lines, driven by elevated loss ratios at multiyear highs and adverse litigation trends. ³⁶ Workers compensation remained a bright spot, recording its twelfth consecutive year of combined ratios below 100 percent. Cyber-insurance rates declined approximately 7 percent year over year, reflecting ample market capacity and improving loss experience in the first half of 2025. ³⁷

In personal lines, auto insurance rate increases moderated to an average of 7.5 percent in 2025, compared to the 20.6 percent increases seen in early 2024, although the average annual cost of auto insurance reached a record $2,101. Homeowners insurance premiums continued to rise, with national average premium increases of approximately 21 percent, driven by rising repair and reconstruction costs, increased natural disaster frequency, and elevated reinsurance costs. ^{38, 39}

Non-life insurers' return on equity was approximately 10 percent in 2025, a slight decline from 11 percent in 2024, supported by portfolio yield improvement to 4 percent but offset by elevated first‑half catastrophe activity and emerging capacity-driven competition. ⁴⁰

Looking ahead, non-life premium growth is expected to moderate in 2026, with global growth forecast at approximately 1.7 percent as rate momentum decelerates and competition intensifies. ⁴¹ Insurers that maintained underwriting discipline through 2025 are well-positioned, but rising geopolitical risks—including the Iran conflict's impact on energy and trade lines, and potential tariff-driven claims inflation—could pressure results. The P&C sector's average market capitalization and valuation multiples fluctuated during 2025, as shown in the chart.

P&C Average Market Cap and Median EBITDA Multiple Trends over 2025 (Market Capitalization in Millions)

Source: Data provided by CapitalIQ.

Multiline

Multiline insurers continued to benefit from their diversified business models in 2025, navigating mixed conditions across P&C and life insurance segments. Given the concentrated nature of the multiline segment, individual company results provide useful insight into broader sector dynamics. The Hartford reported full-year 2025 net income of $3.8 billion, with core earnings reflecting a 19.4 percent return on equity, and P&C written premiums grew 7 percent for the full year. ⁴² Internationally, Allianz posted a record operating profit of EUR 17.4 billion, an 8.4 percent increase, with a return on equity of 18.1 percent and a Solvency II capital ratio of 218 percent. ⁴³ AXA reported underlying earnings of EUR 8.4 billion, up 6percent, with core earnings per share increasing 8 percent. ⁴⁴

Strong capital positions continued to support mergers and acquisitions (M&A) activity across the multiline segment. AIG continued its strategic repositioning, and multiline insurers were active participants in the year's consolidation wave, both as acquirers and as targets of interest from international buyers. Japanese insurers, in particular, continued to pursue international expansion in response to aging domestic markets.

Looking ahead, multiline insurers are expected to continue benefiting from their diversified platforms while confronting challenges related to geopolitical instability, including the Iran conflict's impact on energy and trade insurance exposures. Tariff uncertainty, evolving climate risk, and shifting customer demands will require continued strategic agility. Their ability to cross-sell products across different customer segments and leverage shared operational infrastructure positions them well for sustainable growth through 2026, though early-year geopolitical developments may prompt more cautious capital deployment.

The multiline insurance sector's average US market capitalization and valuation multiples for 2025 are shown in this chart.

Multiline Average Market Cap and Median EBITDA Multiple Trends over 2025 (Market Capitalization in Millions)

Source: Data provided by CapitalIQ.

Brokers

The insurance brokerage sector posted strong financial results in 2025, with the largest firms continuing to deliver robust revenue and earnings growth. Marsh McLennan reported $27 billion in revenue, a 10.0 percent increase (4 percent organic), with operating income of $6.2 billion. Aon reported revenue of $17.2 billion, a 9.5 percent increase (6 percent organic), with adjusted operating margin expanding to 35.5 percent. Arthur J. Gallagher reported $13.9 billion in revenue, a 20.7 percent increase driven heavily by the AssuredPartners acquisition, with adjusted Earnings Before Interest, Taxes, Depreciation, Amortization, and Capitalization (EBITDAC) rising 26 percent. ^{45, 46, 47}

Several landmark transactions reshaped the competitive landscape, as discussed in the "Transactions" section below, underscoring the ongoing premium placed on distribution scale and specialty capabilities.

Despite the high-profile strategic deals, overall broker M&A deal volume declined. Total agent and broker transactions fell to 695 in 2025, an 11.7 percent decrease from 787 in 2024 and 24 percent below the 5-year average. Private equity-backed buyers accounted for approximately 73 percent of all transactions. ^{48, 49}

The initial public offering (IPO) market for insurance companies showed renewed activity in 2025, with 5 insurance companies going public and raising a combined $2.6 billion, the highest US-listed insurance IPO total in 20 years. However, the most closely watched potential listings, Acrisure and HUB International, did not materialize. Acrisure raised $2.1 billion in capital from Bain Capital in May 2025, pushing its valuation to $32 billion, with management indicating an eventual public listing but no near-term plans. ^{50, 51}

As the sector moves further into 2026, brokers are expected to continue focusing on technological innovation, service expansion, and strategic acquisitions to maintain their competitive advantage. The brokerage segment remains well-positioned for sustained growth, given its pivotal role in distribution, advisory, and risk management services. The US insurance brokerage sector's average market capitalization and valuation multiples are shown in this chart.

Brokers Average Market Cap and Median EBITDA Multiple Trends over 2025 (Market Capitalization in Millions)

Source: Data provided by CapitalIQ.

Reinsurance

Global reinsurance dedicated capital reached a record $785 billion at year-end 2025, a 9.7 percent increase over 2024, driven primarily by retained earnings and strong profitability. Alternative and third-party capital expanded 18 percent to $136 billion, supported by record catastrophe bond issuance of $25.6 billion, a 45 percent increase over 2024's prior record of $17.7 billion. ^{52, 53}

The reinsurance sector delivered exceptional financial results in 2025, with the average sector return on equity reaching approximately 17 percent for the third consecutive year of strong returns. The full-year combined ratio improved to approximately 88.5 percent, the best result in over a decade, aided by the absence of significant peak peril losses. Among the major reinsurers, Swiss Re posted record net income of $4.8 billion, a 47 percent increase, with a return on equity of 19.6 percent; Munich Re reported net income of EUR 6.1 billion with an 18.3 percent return on equity; and Hannover Re earned EUR 2.6 billion. ^{54, 55, 56}

This trend was evident in the Southern California wildfires, where primary insurers bore the majority of losses, while most major reinsurers reported absorbing only a modest share of their annual catastrophe budgets.

Reinsurance pricing dynamics evolved meaningfully throughout the year. At the January 2026 renewals, risk‑adjusted global property-catastrophe rates declined approximately 14.7 percent, the largest decline since 2014, reflecting abundant capital, benign peak peril experience, and competitive pressure among reinsurers. Casualty reinsurance rates remained more stable, with loss-free placements generally flat to modestly lower. ^{57, 58}

Looking ahead, the reinsurance sector remains well-capitalized for 2026, though Fitch revised its sector outlook to "deteriorating" from neutral, citing pricing softening in property lines and the potential for increased loss activity. Traditional reinsurance capital is expected to grow more than 6 percent, and the sector is projected to deliver underlying return on equity of approximately 13–15 percent, assuming a normal level of catastrophe losses.

As shown on the chart below, the reinsurance sector's average US market capitalization remained relatively stable through 2025, while total-enterprise-values–to–EBITDA multiples contracted steadily from approximately 10.0x in January to 7.5x in December.

Reinsurance Average Market Cap and Median EBITDA Multiple Trends over 2025 (Market Capitalization in Millions)

Source: Data provided by CapitalIQ.

This contraction reflected investor concern over accelerating rate softening in property-catastrophe reinsurance, as discussed above, as well as Fitch's aforementioned revision of the sector outlook to "deteriorating" from neutral, which further weighed on forward valuation expectations, even as current-year profitability remained strong.

Transactions

The insurance M&A landscape in 2025 was characterized by high-value strategic consolidation, even as overall deal volumes moderated. Global insurance M&A deal value reached approximately $104 billion, up from $88 billion in 2024, while total insurer and broker transactions numbered 211 globally. In the US and Bermuda, Deloitte tracked 455 transactions, including 411 broker deals, 26 P&C insurer deals, and 18 life and annuity deals. ^{59, 60}

The broker segment saw the most significant consolidation activity. Arthur J. Gallagher's $13.5 billion acquisition of AssuredPartners, Brown & Brown's $9.8 billion acquisition of Accession Risk Management Group, and Willis Towers Watson's $1.3 billion acquisition of Newfront collectively reshaped the competitive landscape. Marsh McLennan's $7.8 billion acquisition of McGriff, announced in 2024, was fully integrated during 2025, further consolidating middle-market distribution.

In the life and annuity sector, several transformative transactions occurred. MetLife executed a $10 billion variable annuity risk transfer with Talcott Resolution in April. Acquarian completed its $4.1 billion acquisition of Brighthouse Financial in November. In early 2026, Corebridge Financial and Equitable Holdings announced a $22 billion all-stock merger that, if completed, would create a combined entity with approximately $1.5 trillion in assets under management. ^{61, 62}

In the P&C segment, deal volume declined but aggregate dollar value rose, reflecting a shift toward larger, more strategic transactions. Sompo Holdings' Endurance unit acquired Aspen Insurance Holdings from Apollo Global Management for $3.5 billion in August, and White Mountains sold a majority stake in its Bamboo platform to CVC Capital Partners for $1.8 billion. ⁶³

Private equity interest in insurance assets remained strong, with notable deals including Sixth Street's $5.1 billion acquisition of legacy specialist Enstar Group Limited. InsurTech M&A also reached a 3-year high, with Munich Re's $2.6 billion acquisition of Next Insurance in March signaling major insurer's appetite for technology-enabled distribution. ^{64, 65}

Cross-border activity was particularly noteworthy in 2025, with 43 completed cross-border deals globally. The Asia-Pacific region was the most active, with 59 transactions compared to 39 in 2024, driven largely by Japanese insurers deploying capital internationally in response to their aging domestic markets. ⁶⁶

Subsequent Events: Iran Conflict and Implications for Insurers

The most consequential geopolitical development affecting the insurance industry in late 2025 and early 2026 has been the escalating conflict involving Iran. In June 2025, the 12-Day War saw Israeli airstrikes on Iranian nuclear and military facilities, followed by Iranian missile and drone retaliation. A ceasefire was reached on June 24, 2025, but tensions remained elevated. In September 2025, the UN Security Council reimposed sanctions on Iran, including restrictions on insuring Iranian tankers and prohibitions on financial services related to oil transactions. ⁶⁷

The conflict escalated dramatically on February 28, 2026, when the US and Israel launched coordinated airstrikes on sites across Iran, resulting in the death of Supreme Leader Ali Khamenei and multiple senior officials. In response, Iran effectively closed the Strait of Hormuz to commercial shipping, disrupting approximately 20 percent of the world's daily oil supply and a significant share of global liquefied natural gas (LNG) volumes. By late March 2026, transits through the Strait of Hormuz had declined approximately 95 percent compared to the same period in 2025. ⁶⁸

By mid-April 2026, a fragile, Pakistan-mediated temporary ceasefire was established between the US and Iran, which was subsequently extended as negotiations continued. However, as of early June 2026, sporadic exchanges of fire between the countries continued, and the strait remained largely closed to standard commercial traffic as Iran began attempting to enforce a sovereign toll and permit system and US forces enforced a naval blockade against Iranian shipping. For the insurance market, this has introduced unprecedented legal and underwriting complexities, as traditional coverage remains entirely frozen while Tehran attempts to market its own alternative, a "Hormuz Safe" maritime insurance program.

The insurance market response has been swift and severe. War-risk ship insurance premiums for Strait of Hormuz transits surged from a baseline of approximately 0.125 percent of hull value to as high as 3 percent, with some stranded tankers paying up to 10 percent, levels not seen since the Iran-Iraq Tanker War of the 1980s. All 12 members of the International Group of P&I Clubs, which collectively cover 90 percent of the world's ocean-going tonnage, issued cancellation notices for war risk coverage in the Persian Gulf region, and the Lloyd's Joint War Committee redesignated the entire Arabian Gulf as a conflict zone. ^{69, 70, 71} Cargo insurance rates increased 150–200 percent on shipments transiting the Gulf, and hull and machinery insurance rates rose 80–120 percent for vessels operating in the region.

These developments have had cascading effects. Brent crude oil prices surged from approximately $80 per barrel in early March 2026 to a peak of $126 per barrel and remained elevated and volatile thereafter. All major container shipping carriers, including Maersk, CMA CGM, MSC, and Hapag‑Lloyd, suspended transits through the Strait of Hormuz, redirecting vessels around the Cape of Good Hope at an additional 10–14 days per voyage. Qatar declared force majeure on LNG contracts in late March, and Asian benchmark LNG prices jumped approximately 40 percent. ⁷²

For insurers, the implications extend well beyond marine and cargo lines. Credit insurers have tightened terms for buyers with exposure to Iranian trade or proximate jurisdictions. Political risk insurance demand has increased substantially, prompting the US International Development Finance Corporation to announce guarantees for maritime trade through the Gulf. The broader question for the industry is how to price and aggregate geopolitical risk in a world where choke point disruptions appear increasingly frequently and whether the current conflict will produce structural changes in marine war-risk pricing similar to the lasting effects of the Tanker War in the 1980s. ⁷³

Conclusion

As the insurance industry turns the page on a mixed 2025 with strong financial performance but underwhelming market performance, it enters 2026 in a fundamentally different operating environment. The $60.9 billion underwriting gain and sub-93 percent combined ratio in US P&C insurance demonstrated the power of disciplined underwriting and sustained rate adequacy. Record annuity sales of $464.1 billion and life insurance premiums of $17.5 billion confirmed the continued vitality of the life sector in a favorable interest rate environment. Reinsurers delivered a third consecutive year of strong returns, and the sector's capital base reached record levels.

Yet the road ahead is marked by exceptional uncertainty. The Iran conflict and closure of the Strait of Hormuz represent the most significant disruption to global energy and shipping markets since the 1970s, with direct and cascading consequences for marine, cargo, energy, political risk, and trade credit insurance lines. The tariff regime implemented in April 2025, with effective US tariff rates reaching their highest levels since 1935, has introduced structural uncertainty into global supply chains and trade patterns that will take years to fully resolve. ⁷⁴

The structural evolution of catastrophe losses remains perhaps the industry's most persistent challenge. With insured losses exceeding $100 billion for 6 consecutive years and secondary perils accounting for more than 90 percent of 2025's losses, the industry faces an urgent imperative to improve modeling, risk selection, and diversification strategies. Reinsurers' continued shift toward higher attachment points is transferring more risk to primary insurers, requiring careful recalibration of risk retention strategies.

Technology transformation continued apace, with AI adoption becoming mainstream across underwriting, claims, and distribution. The regulatory environment is responding, with 23 states adopting the NAIC AI Model Bulletin and 4 states enacting AI-specific legislation in 2025. Insurers that can deploy AI at scale while maintaining transparency and regulatory compliance will gain meaningful competitive advantages. M&A will continue to serve as a critical tool for strategic repositioning, though deal volumes may be influenced by geopolitical uncertainty, tariff-driven economic effects, and interest rate trajectories. The brokerage sector's ongoing consolidation, highlighted by the $13.5 billion AssuredPartners and $9.8 billion Accession transactions, underscores the premium that investors place on distribution scale and specialty capabilities.

As insurers prepare for an operating environment shaped by geopolitical instability, evolving catastrophe patterns, and rapid technological change, they face a critical imperative—to maintain the underwriting discipline that drove 2025's exceptional results while building the strategic capabilities needed to navigate an increasingly complex risk landscape. Sustained performance in 2026 will demand not just capital strength, but strategic clarity, balancing innovation with risk discipline and opportunity with prudent caution.