North American life insurers are heading into 2026 with balance sheets and earnings power that continue to support strong credit profiles, according to a new sector view.
Despite a slowing macroeconomic backdrop, S&P Global Ratings expects the industry’s fundamentals to remain resilient, underpinned by robust capitalization, steady profitability and sustained demand for retirement-focused products.
The report notes that the sector remains one of the most stable it covers, with the overwhelming majority of rated insurers clustered in the ‘A’ and ‘AA’ categories. Roughly 95% of North American life insurers carry ratings of ‘A-’ or higher, while 87% of ratings are assigned stable outlooks. Although negative outlooks increased modestly compared with 2024, rating actions over 2025 were largely driven by company-specific developments rather than systemic or macroeconomic pressures.
From an economic standpoint, the environment remains broadly supportive. S&P forecasts US real GDP growth to average about 2% in 2025 and 2026, down from 2024 levels but still favorable for insurers. Interest rates are expected to remain relatively stable, with the 10-year US Treasury yield projected to drift lower toward 3.7% by 2027 and 2028. According to the report, this combination of slower growth and steady long-term rates “bodes well for the industry,” limiting reinvestment risk while supporting product pricing and asset-liability management.
Most rated insurers operate with capital buffers assessed at the highest confidence levels in S&P’s capital model, providing meaningful protection against economic or market stress. Profitability has also improved since the pandemic, supported by rising sales volumes and higher portfolio yields, even as some earnings volatility persists.
On the sales front, annuities remain a central growth engine. Total annuity sales have increased consistently since 2020, led by fixed-rate and fixed-index products. Registered index-linked annuities continue to gain traction, often at the expense of traditional variable annuities. Demographic trends, particularly an aging US population and heightened demand for retirement income solutions, are expected to keep annuity sales elevated. By contrast, individual life insurance remains a mature market, with sales growth tracking broader economic and population trends.
Investment strategy is another area drawing close attention from advisors and regulators alike. Life insurers have continued to increase allocations to private credit and other less liquid assets in pursuit of higher yields and diversification.
While these investments remain a relatively small share of total portfolios and are largely investment-grade, S&P Global Ratings acknowledges growing scrutiny from investors, regulators and the media. The firm emphasizes that complexity, credit and liquidity risks associated with private credit are incorporated into its rating analysis but warns that broader skepticism could weigh on industry confidence regardless of asset performance.
Looking ahead, S&P Global Ratings highlights several evolving uncertainties for the sector, including regulatory changes affecting statutory reporting, the continued convergence of insurance and asset management, early adoption of generative AI, medical advances that could influence mortality trends, and ongoing geopolitical risks.
Even so, S&P’s overall message is that North American life insurers appear well positioned to navigate these challenges while maintaining strong credit quality into 2026.
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