Merger and acquisition activity among European insurers is likely to pick up in 2026 as softer non-life pricing, slower economic growth and stabilising investment yields limit prospects for organic earnings growth, according to Fitch Ratings.
In a sector update, Fitch said it expects deal‑making to increase particularly in specialty and reinsurance, UK, Dutch and German life, and European bancassurance. Strong Solvency II positions and headroom against leverage metrics mean many groups have both the capital and ratings capacity to transact.
Many European insurers already report Solvency II ratios above their internal targets. The forthcoming EU Solvency II reform, due to take effect on Jan. 1, 2027, could lift ratios by around five to seven percentage points on average and by up to 20 points for some groups. Fitch said this provides “strong capital capacity” to finance acquisitions and reduces the risk of negative rating action directly linked to M&A.
Most rated insurers, it added, have room to issue additional debt without breaching its guidelines for financial leverage and fixed‑charge coverage at current rating levels.
Fitch argues that M&A can support revenue and earnings growth as the sector contends with softer pricing in parts of the non‑life market, muted economic expansion and a plateau in investment yields after the recent rate‑rising cycle. Transactions are being used to increase scale in core markets, improve diversification and cost efficiency, or add technology and digital distribution capabilities.
The agency also warned that the benefits of acquisitions can be offset by execution and integration risk, higher leverage and weaker fixed‑charge coverage where deals are debt‑funded.
The expected rise in activity follows several years of hardening in commercial lines and reinsurance, followed by early signs of rate deceleration. Against that backdrop, acquiring growth and capability is becoming more attractive to boards than relying solely on further rate and exposure increases.
In specialty and reinsurance, Fitch sees continued appetite for platforms that deliver differentiated underwriting and diversification, as well as access to Lloyd’s. Lloyd’s of London holds an Insurer Financial Strength rating of AA‑/Stable from Fitch and remains a core channel for global specialty risk.
The pool of listed London market carriers has narrowed, with Beazley, Hiscox and Lancashire among the remaining quoted targets. Fitch cited scarcity value, Lloyd’s access and portfolio diversification as factors behind Zurich Insurance Company’s interest in Beazley, alongside transactions such as American International Group’s acquisition of Convex and the Radian–Inigo deal in 2025.
Further consolidation in specialty and reinsurance is likely to influence capacity panels and negotiating dynamics in London and European hubs, as a smaller number of larger groups control a greater share of appetite.
In UK life, Fitch expects acquirers, including private capital‑backed platforms seeking long‑duration liabilities, to remain active in the pension risk transfer (PRT) market. Partnerships between European life insurers and large, mainly US, alternative investment managers are also likely to continue, although UK and EU regulators are monitoring potential misalignments between policyholder and shareholder interests and risks linked to asset‑intensive reinsurance structures.
In the Netherlands, PRT volumes are projected to increase as the country completes its transition from defined‑benefit to defined‑contribution pensions by 2028. Fitch expects NN Group, Athora, Achmea and ASR Nederland to be among the most active consolidators.
The German life segment remains conducive to back‑book consolidation, with incumbents such as Viridium, Frankfurter Leben and Athora seen as best placed to execute further deals. As in the Netherlands, Fitch sees limited scope for new consolidators to enter, suggesting existing run‑off platforms will continue to dominate.
The agency noted that these trends will have implications for asset markets as well as insurance balance sheets, as consolidators and investment partners deploy capital into credit, private markets and long‑dated assets to back acquired liabilities. Supervisors are expected to keep a close watch on asset quality, concentration and reinsurance arrangements as activity accelerates.
In bancassurance‑heavy markets such as France and Belgium, Fitch expects banks to maintain or increase stakes in insurance subsidiaries, supported by favourable capital treatment under the Danish Compromise. However, the European Banking Authority clarified last January that EU rules do not allow banks to extend Danish Compromise capital relief to asset managers owned through insurance subsidiaries, which could limit some structures.
Consolidation has often been led by incumbents reinforcing leading positions in core markets, as seen in Aviva’s acquisition of Direct Line in 2025. Fitch expects that pattern of strongly capitalised AA/AA‑rated groups using surplus capital and rating strength to consolidate specialist, life and bancassurance niches, to remain a feature of the European insurance M&A landscape into 2026.
