Heading into 2026, insurers are operating in a climate of heightened uncertainty. Economic and geopolitical volatility persists, catastrophic events are increasing in frequency and severity, and long-standing industry boundaries are blurring as distributors consolidate and reshape the value chain. Meanwhile, technology continues to change business models, and customer expectations are evolving quickly—redefining what value, convenience, and trust look like in insurance.
For many stakeholders, “business as usual” is unlikely to be sufficient. A new operating reality is taking shape, and carriers may need to rethink how they run the business, how they engage customers and partners, and how they pursue growth in order to remain competitive.
The technology agenda itself is also shifting. Modernization is no longer primarily about upgrading platforms in the abstract; it is increasingly about executing real AI use cases at scale, strengthening data foundations, and aligning architecture and security to support those ambitions. But the tools alone will not deliver results. Insurers will need to enable their workforce to perform in digital, data-rich environments—through new capabilities, redesigned processes, and operating-model changes that make adoption durable.
Importantly, this pace of change does not appear temporary. Carriers that accept the new level of complexity—and act decisively to reassess business models, product design, operating tools, and stakeholder interactions—may be best positioned to compete through the next cycle.
Property and casualty (P&C) insurers appear to be moving beyond a prolonged hard market into a period of margin pressure and slower premium growth (see figure 1). Globally, premium growth is expected to decline through 2026, shaped by intensified competition, fading rate momentum, and emerging cost pressures such as potential tariffs and reserve adjustments. Emerging markets are also expected to slow in 2025 and 2026, influenced by an economic deceleration in China, which accounts for roughly half of emerging-market premiums.
At the same time, profitability dynamics are diverging by region. Advanced European markets—including France, Germany, and the United Kingdom—are expected to see return on equity improve from 9.1% in 2024 to 11.6% in 2025, supported by easing cost pressures.
In contrast, margins are expected to deteriorate across both personal and commercial lines in many markets as trade-policy uncertainty, supply chain disruption, and labor shortages continue to lift goods costs and wage inflation. In the United States, underwriting performance was the strongest in more than a decade in 2024, yet the combined ratio is projected to worsen from 97.2% in 2024 to 98.5% in 2025 and 99% in 2026.
Investment income may provide some support, with U.S. investment yields expected to edge up from 3.9% in 2024 to 4.0% in 2025 and 4.2% in 2026. However, if the Federal Reserve continues reducing rates following its first 25-basis-point cut in September 2025, the spread between existing portfolio yields and new-money rates may narrow, limiting further investment-income gains.
Beyond market and economic movements, P&C carriers face several structural and systemic pressures.
Weather-related losses remain a pervasive challenge across personal and commercial lines. Events such as floods in Germany and wildfires in the United States, Canada, and Australia underscore the continued rise in catastrophe frequency and severity. These trends are increasing the cost of risk transfer for primary insurers. As reinsurance terms tighten and insurers retain more risk, loss ratios can rise—contributing to a global protection gap estimated at US$183 billion.
Legal risk is also intensifying. Third-party litigation funding is expanding beyond the United States to markets including the United Kingdom, Australia, Canada, and parts of Asia. Social inflation—driven by broader definitions of liability, higher jury awards, and legal activism—is increasing claims severity in casualty and liability lines. Some jurisdictions are responding with tort reforms and enhanced transparency requirements intended to reduce pressure on insurers.
Structural shifts in distribution and risk financing are adding further complexity. Broker consolidation can weaken carrier negotiating leverage, large corporates are increasingly self-insuring through captives, and alternative risk players are entering the market. In response, carriers may need more agile capital approaches that balance retained risk with third-party reinsurance to manage volatility, while also using collaborative financing structures such as catastrophe bonds, sidecars, and other insurance-linked securities. These vehicles can transfer a portion of risk into capital markets, increase capital flexibility, broaden the funding base, and improve resilience against large-scale losses.
Despite these pressures, P&C insurers have meaningful tailwinds available—particularly through technology-enabled risk prevention and new service-based revenue opportunities.
Advancements ranging from generative AI to geospatial analytics are expanding what insurers can do across the value chain. Drones can support roof inspections, satellite imagery can accelerate catastrophe triage, and IoT sensors can enable near-real-time monitoring. Together, these capabilities can help insurers predict, prevent, and reduce losses across multiple lines of business. Regulatory environments are also showing support as insurers emphasize more data-driven and science-based approaches to risk awareness and mitigation.
At the same time, insurers and governments are increasingly adopting more proactive approaches to risk management, creating openings for new models of collaboration and prevention.
Finally, as alternative services mature—risk insights, monitoring, prevention, and related capabilities—insurers may be able to monetize them more meaningfully. Deloitte research projects fee-based revenue could grow to US$49.5 billion by 2030, indicating that services beyond traditional underwriting may represent a larger share of industry revenue over time.
If you want, I can rewrite this again in a more “executive memo” voice (tighter, fewer numbers in-line, more emphasis on implications), or in a more “thought leadership” voice (more narrative, more forward-looking).
Global life insurance growth is expected to decelerate, with policy uncertainty in the United States potentially prompting consumers to delay purchases or scale back coverage. Growth in advanced markets is likely to remain more muted than in emerging markets, where low penetration rates and expanding middle classes continue to support demand.
Even as life premium growth slows, annuities are maintaining strong momentum. In the United States, annuity sales increased 12% in 2024 to US$432.4 billion, and quarterly totals stayed above US$100 billion for seven consecutive quarters through 2Q2025. If monetary policy continues to loosen, fixed-rate annuity demand may cool, shifting product emphasis toward indexed annuities. In Europe, unit-linked sales are accelerating—particularly in Italy and France—and that momentum may broaden to other advanced markets, including the United States.
Insurers are expanding allocations to private credit globally, even as concerns rise about liquidity constraints and limited regulatory oversight. Managed assets grew 25% to US$4.5 trillion in 2024, and private placements rose to 21.1% of total insurance assets under management, up from 20% at the end of 2023.
Market sentiment is reinforcing this shift. A Goldman Sachs survey in March 2025 found that 61% of CFOs and CIOs surveyed globally expect private credit to deliver the highest total return over the next year. That expectation is translating into action: 64% of respondents in the Americas and 69% in Asia-Pacific indicated plans to increase private-credit allocations over the next 12 months.
As portfolios tilt further toward alternatives, carriers are increasingly converging with private equity and other alternative asset managers to access investment capabilities and scale. This convergence is taking multiple forms, including full acquisitions of life and annuity entities, strategic partnerships, and minority-stake investments. Large investment firms such as Apollo and Brookfield continue to view life insurers as attractive sources of long-duration capital to deploy.
Recent partnerships illustrate the direction of travel. In June 2025, Lincoln Financial and Bain Capital announced a partnership aimed at accelerating Lincoln’s portfolio transformation and capital allocation priorities while leveraging the asset manager’s platform across asset classes. Similarly, on April 8, 2025, Guardian Life and Janus Henderson announced a strategic relationship under which Janus Henderson becomes Guardian’s investment-grade public fixed-income asset manager.
To improve capital efficiency, some life carriers are also increasingly using reinsurance sidecars to move blocks of business to offshore jurisdictions with lower reserve requirements, thereby transferring a portion of policy liabilities. Sidecars enable third-party investors to share in the profit-and-risk profile, freeing capital for carriers to pursue new underwriting growth. Reserves ceded to sidecars nearly tripled between 2021 and 2023 (latest available data) to nearly US$55 billion, and additional sidecars were launched in 2024, including a notable structure involving Allianz SE backed by Voya Financial and Antares Capital.
Regulators are responding to the increased complexity and opacity of alternative assets. In the United States, the National Association of Insurance Commissioners is developing guiding principles to refine risk-based capital formulas and improve the precision and transparency of asset-risk calculations. Scrutiny is also increasing internationally. For example, the Bermuda Monetary Authority issued a paper in December 2023 on the supervision and regulation of PE-backed insurers, and the International Monetary Fund released a white paper focused on private equity investments in the life insurance industry. As oversight tightens, investors and carriers alike may need to evaluate not only current requirements, but also how regulatory expectations could evolve over time.
A related outcome of the private equity–insurance convergence is the emergence of models that position life insurance as a tax-efficient wealth management tool, reflecting a broader re-framing of the category beyond traditional protection and retirement-income constructs.
Strategic partnerships can also expand carriers’ revenue options beyond traditional products. One pathway is building partner ecosystems that provide fee-based services adjacent to core offerings—such as home care, wellness, and aging support. Genworth, for example, diversified its revenue stream in 2024 through a partnership with a homecare startup to build a service network designed to simplify how older adults navigate housing, services, and care.
Partnership models are also evolving in the operations layer. Third-party administrators, historically used primarily for cost reduction, are increasingly positioned as growth enablers. Many now support product innovation, channel expansion, and modernized service models—often introducing new offerings faster and helping carriers access broader markets. In this structure, a TPA can become an operating extension of the carrier, supporting both launches and long-run administration.
In developing markets, alliances may also help close persistent protection gaps by improving access, affordability, and relevance. In regions with high mobile penetration—such as sub-Saharan Africa and South Asia—carriers may partner with telecommunications providers to distribute micro life insurance products, using mobile rails to reduce friction and expand reach.
Independent distribution—which accounts for more than half of retail life insurance sales and a significant share of annuity volumes—has been reshaped in recent years by consolidation, much of it driven by mergers and acquisitions. This wave is complicating legacy distribution strategies and altering how carriers engage intermediaries.
As distributors consolidate, bargaining power can shift toward the intermediary, potentially affecting commissions, service expectations, and product economics. Consolidation also blurs previously distinct segments—brokerage general agencies, marketing organizations, producer groups, and financial planning firms—and changes how carriers define coverage models, support structures, and go-to-market approaches across each channel.
To differentiate amid this transformation, carriers are likely to adjust strategy in several ways. Some may pursue proprietary or exclusive products tailored to specific distributor groups, while others may focus on removing sales and service bottlenecks that impede conversion. More sophisticated use of customer data may also become a competitive lever—enabling better personalization, more relevant product recommendations, and a more seamless distribution experience as channel boundaries continue to merge.
If you want, I can also tighten this further into a more “board-ready” version (shorter, higher signal-to-noise, fewer examples) while keeping the same facts and structure.
After peaking in 2024, growth in the group insurance segment is expected to moderate over the next several years. Employment and wage conditions are anticipated to tighten, and rising health care costs may begin to pressure participation in traditional employee benefit programs. Those macro forces can constrain baseline growth, but they do not eliminate the opportunity for carriers that are willing to differentiate in how they design offerings and engage intermediaries.
One of the clearest tailwinds is the continued expansion of ancillary benefits. Many insurers are positioning to capture this demand by building products that are more tailored to specific industries, workforce demographics, and underserved segments such as small businesses and gig workers. With five generations now represented in the workforce, “one-size-fits-all” benefits packages are increasingly mismatched to employee needs. Carriers that broaden portfolios into more personalized solutions—such as wellness programs and services, elder care support, in-office daycare options, and adoption assistance—can strengthen their value proposition to employers while giving brokers more relevant tools to assemble modern benefits packages. In parallel, as the decline of traditional pension plans intensifies demand for lifetime income options, more group insurers are introducing in-plan annuities as part of workplace benefits.
Product innovation, however, is only part of the differentiation equation. Carriers may also improve market penetration by elevating their value to intermediaries—particularly independent brokers, who generate the majority of workplace benefits business. As benefits decisions become more complex, brokers’ roles are continuing to shift from transactional sales toward consultative navigation. In that environment, brokers increasingly influence not only carrier selection and product mix, but also the enabling technologies that make benefits easier to buy, administer, and use.
That dynamic makes digital connectivity a commercial requirement rather than a technical upgrade. Group insurers can stand out by ensuring their offerings integrate cleanly into employer benefits platforms and workflows, reducing friction for HR teams and improving the employee experience. Evidence suggests the switching risk is real: a meaningful portion of employers indicate willingness to change carriers if products cannot connect to their benefits technology platform. As a result, digital capabilities—especially integration tooling such as application programming interfaces (APIs)—are pushing many insurers to retire or modernize legacy systems that limit their ability to deliver contemporary experiences. A coherent API strategy can support more personalized interactions, faster enrollment and servicing, and improved operational efficiency, all of which can make a carrier more attractive to both brokers and employers.
Beyond products and platform integration, specialized administrative capabilities can also become a differentiator. Employee leave management is a clear example, particularly for employers operating across multiple states or managing distributed and remote workforces. The regulatory and cultural variance across regions increases complexity, and poor management can become expensive—especially when navigating requirements tied to frameworks such as the Family and Medical Leave Act and the Americans with Disabilities Act Amendments Act. Carriers that develop practical expertise, tools, and guidance in leave management can become more valuable partners to brokers evaluating group carriers for complex employer environments.
Finally, as in other insurance segments, distribution consolidation is increasing pressure on commissions and profit-sharing economics. A growing number of participants in the group insurance value chain are seeking compensation, and many carriers are concerned about “cost stacking.” This makes it even more important for carriers to differentiate through tangible value—innovative offerings, seamless digital experiences, and operational capabilities that reduce complexity—rather than relying on pricing or traditional distribution leverage alone.
After a year dominated by headlines about pilots and proofs of concept, many insurers are now accelerating their AI agendas with a more pragmatic posture. Adoption rates still vary by carrier and market, but the center of gravity has shifted toward use cases that can demonstrate clear ROI while keeping operational, regulatory, and reputational risks within manageable bounds.
Fraud detection is a prominent example of where AI can translate into near-term value. Insurers are increasingly applying machine learning to identify anomalies in claims activity and surface suspicious patterns earlier in the lifecycle, when intervention is more effective and less costly. Industry estimates suggest that scaling real-time, AI-driven fraud analytics could produce very large savings over the coming decade, particularly for P&C carriers.
Another emerging priority is agentic and workflow-oriented AI, where systems can assist with higher-volume decision processes without requiring proportional headcount growth. Underwriting assistance is often cited as a “sweet spot” because it can help teams triage submissions, prioritize what matters, and reduce cycle times while maintaining human control over final decisions. Carriers in several regions are exploring agentic capabilities across underwriting and claims, though many remain cautious about fully experimental deployments and are instead doubling down on foundational modernization efforts—especially data transformation and cloud migration—so they can scale safely when the business case is proven.
Customer engagement is also becoming a major AI investment area, particularly in call centers and service operations. Many carriers are deploying virtual assistants and automation for lower-risk, well-bounded service journeys such as basic inquiries, simple policy servicing, and initial claims triage. In some Asian markets, adoption has moved faster for these “safer” use cases, and regulatory posture in places like Singapore and Hong Kong has increasingly encouraged experimentation through mechanisms such as grants, sandboxes, and structured acceleration programs.
Regulation and data-sharing frameworks can materially influence how quickly insurers can modernize. For instance, open data initiatives—such as Brazil’s Open Insurance framework—are designed to enable customers to share data across insurers, which in turn can intensify competition while creating opportunities for more personalized offerings. These environments tend to push carriers toward API-led integration strategies, broader partner ecosystems, and closer collaboration with insurtechs, all of which can help insurers work around legacy constraints and test modern digital distribution models more quickly.
Despite the surge in AI activity, many insurers are still struggling to convert experimentation into durable enterprise value. A common blocker is the same one that has constrained prior waves of digital transformation: fragmented data, inconsistent definitions, and legacy systems that were not designed for real-time decisioning or continuous learning.
Perfect data hygiene is not required for every AI initiative, but standardization and control become critical the moment a use case affects customers, regulators, or financial outcomes at scale. Insurers increasingly need disciplined practices around data quality, integration, and master data management to support a unified customer view, consistent business logic, and timely processing. Without that foundation, AI outputs can conflict across functions, degrade trust, and ultimately fail to embed into frontline workflows.
System modernization remains a parallel priority, with many carriers pursuing multi-year transformations—often cloud-centered—to simplify architectures and improve speed. At the same time, some executives are reevaluating the traditional “rip and replace” approach, questioning whether next-generation AI capabilities could eventually reduce reliance on certain legacy platforms. The practical reality is that most carriers must strike a balance: modernize enough to enable scale and resilience now, while making architectural choices flexible enough to evolve as AI-driven operating models mature.
As enterprise architecture becomes more complex, partner selection matters more. Carriers increasingly look for technology solutions that can support integrated AI services, strong governance, and adaptable patterns that align with business objectives rather than locking the organization into brittle designs.
It is also becoming clear that architecture decisions are not purely “software questions.” Hardware is increasingly part of the conversation, particularly for computationally intensive actuarial and modeling workloads. Some life insurers are exploring high-performance computing approaches—such as GPU-accelerated environments—to speed complex calculations and enable more advanced modeling, and in some cases that push is coming directly from actuarial teams rather than central IT.
Many of the same forces driving modernization—cloud adoption, API connectivity, IoT expansion, and AI deployment—also increase exposure by widening the attack surface. That creates a straightforward trade-off for insurers: faster innovation can raise risk unless security capabilities evolve at the same pace.
High-profile breaches and ransomware incidents continue to reinforce a basic truth in insurance: trust is a core product attribute, not just a compliance requirement. Customer information is both highly sensitive and highly regulated, and failures in stewardship can trigger legal, financial, and reputational consequences that significantly outweigh the gains from poorly governed innovation.
To sustain momentum without eroding confidence, insurers need to treat cybersecurity and data protection as design constraints from day one. That includes stronger controls over data access and usage, rigorous third-party risk management, resilient cyber defenses, and a culture where security practices are reinforced as operational norms—not seen as a barrier to delivery. In a connected and increasingly digital insurance ecosystem, the carriers that scale AI successfully will likely be the ones that modernize their foundations while reinforcing trust at every layer.
For many insurers, the decisive factor in digital transformation will be whether they can embed digital tools into day-to-day work in a way that strengthens human judgment, improves execution, and builds a durable advantage. Speed matters, but so does absorption: how quickly the organization can turn new capabilities into better decisions, better service, and better performance.
That requires more than automating tasks. It often demands a deliberate re-evaluation of the workforce anchored in a clear, purpose-driven employee value proposition—one that reflects how value will be created when people and AI work together. Upskilling alone is rarely sufficient. Leaders increasingly need to ask two harder questions: how do we design work so humans and AI collaborate in a meaningful, reliable way, and how do we share the value created through that collaboration so adoption is sustained rather than episodic?
Answering those questions typically calls for a dual focus on capability and continuity. Insurers need mechanisms to preserve legacy knowledge as experienced employees exit, while also recruiting next-generation talent and reskilling mid-career professionals who are deeply familiar with today’s operating model. Many carriers will also need to rethink the role of innovation hubs—not as isolated “labs,” but as engines that translate experimentation into scaled workflow change. In practice, this means rethinking not just how work gets done, but who does it, how they are enabled, and how the organization prepares for what comes next.
Workforce modernization is running into structural friction. Veteran employees are leaving, recruiting is not fully offsetting attrition, and insurers continue to face challenges attracting and retaining talent across markets. Even where hiring is successful, new entrants often arrive without a practical understanding of insurance’s realities: complex products, nuanced risk decisions, and heavy regulatory requirements. The industry’s shift toward digital and customer-centric operating models does not eliminate the need for deep technical and regulatory fluency—it raises the bar for blending both.
There is also a mismatch between expectations and maturity. Graduates and experienced hires with advanced skills in AI and related domains often want to work on transformative initiatives. But many carriers remain in pilots and proofs of concept. When specialized talent is reassigned into traditional workstreams because the transformation engine cannot absorb them, disengagement risk rises quickly—particularly if career paths and impact are unclear.
The most complex challenge, however, may sit in the middle of the organization. Mid-career professionals—often the institutional backbone of underwriting, claims, operations, and finance—tend to be deeply embedded in legacy systems and established ways of working. They now need to become AI-literate, not in the sense of building models, but in the sense of using AI outputs responsibly, interpreting probabilistic recommendations, understanding limitations and failure modes, and integrating insights into real-world decisions that have customer and financial consequences.
Closing the “talent gap” is less about training volume and more about redesigning the workforce system. Many insurers are recognizing that it is not feasible—or cost-effective—to build every capability internally. The more workable approach is an agile workforce strategy that deliberately mixes how capabilities are sourced and scaled.
In practice, this often means building skills through experiential, cross-functional work rather than classroom-only learning; selectively hiring for scarce specialties; borrowing capacity through partnerships, vendors, and flexible talent networks; automating routine work to free human time for judgment-heavy activities; and redesigning workflows so that human expertise and AI tools reinforce each other rather than compete for ownership of decisions.
When executed well, human-AI collaboration can shift employees into more meaningful roles—those requiring discretion, empathy, negotiation, and contextual judgment—while AI handles pattern detection, summarization, and throughput. For insurers, the payoff is not only operational efficiency, but also the potential to deliver more compassionate, trust-based customer experiences in moments that matter, such as claims, complex underwriting, and life-event servicing.
A defining feature of the insurer of the future is a stronger customer orientation. Customer experience should not be treated as a secondary metric, because it materially influences retention, cross-sell, advocacy, and ultimately growth. In insurance, experience is often the product: policyholders remember how quickly issues were resolved, how clearly information was explained, and whether the organization showed competence and care when it mattered.
Customer expectations are also diverging by line of business. In P&C, many customers increasingly want speed, convenience, and tailored solutions delivered seamlessly across digital and human touchpoints. Improvements in mobile and web claims experiences appear to be raising satisfaction, particularly where carriers expand service features and create interfaces that feel intuitive and modern. In life insurance, the center of gravity is different. Trust, transparency, and long-term guidance tend to be paramount, and customers often prefer human interaction when decisions involve family security, retirement income, estate planning, or complex underwriting considerations. Even so, many carriers across both P&C and L&A continue to fall short, often due to limited product flexibility and service journeys that feel fragmented across channels or handoffs.
At the same time, underinsured segments, shifting societal needs, and technology-driven disruption are creating opportunities for insurers to pursue new markets and new service models. That combination is pushing many carriers beyond incremental fixes and toward a more fundamental question: how—and for whom—do we deliver value? Answering it usually requires a close examination of product design, a sharper definition of customer segments, and a redesign of the end-to-end journey from discovery through servicing and claims.
Partnership ecosystems are increasingly becoming a practical route to faster innovation. As technology shortens product-development cycles and improves the ability to test and refine offerings, insurers are forming alliances that help them move from static products to more responsive, feedback-driven solutions. Some partnerships are focused on reducing friction in the customer journey—for example, accelerating application and underwriting decisions—while others extend beyond underwriting into prevention and wellness models that reduce risk and create additional services customers may value.
In commercial and high-risk personal lines, collaboration is also supporting hybrid models that blend protection with prevention. Where real-time data is available, insurers and technology partners can increasingly connect underwriting, monitoring, and mitigation into a more continuous risk-management loop. These arrangements can create meaningful differentiation when they reduce losses, improve resilience, and give customers tangible support rather than purely financial reimbursement after the fact.
Many insurers have invested in omni-channel service, but “being everywhere” is not the same as connecting experiences well. As interaction volumes grow and service complexity increases, the challenge becomes delivering a coherent journey while managing cost-to-serve. This is where right-channeling becomes a practical operational capability: using rules, data, and context to guide customers toward the most effective interaction mode—digital, human, or hybrid—based on intent, complexity, urgency, and risk.
Right-channeling works best when it is supported by integrated data and coordinated teams. When customer context, coverage details, prior interactions, and next-best actions are visible across channels, insurers can resolve issues faster, reduce repeat contacts, and offer more relevant support. It also enables smarter routing: simpler requests can be handled through low-cost self-service tools, while emotionally complex, high-stakes, or high-value interactions can be escalated quickly to trained humans. Done well, this reduces wait times, lowers service cost, and improves perceived responsiveness without forcing customers into channels that feel inappropriate for their situation.
Insurance is often experienced at moments of vulnerability: death, illness, disaster, or major financial decisions. In those moments, customers are not only seeking transactions—they want reassurance, clarity, and a sense that the insurer understands the human context. As automation expands, empathy becomes a differentiator rather than a “soft” nice-to-have, especially in life insurance and in severe P&C events where emotions are high and stakes are personal.
Human-machine collaboration can support this by making frontline teams more capable in real time. When advisors and service staff have access to dynamic quoting, guided workflows, context-aware recommendations, and faster policy review, they can spend less time searching for information and more time listening, explaining, and solving. The operational benefit can be material, but the trust benefit is often even more valuable.
Finally, incentives matter. If compensation and performance management reward speed or volume alone, employees will naturally optimize for throughput—even when customer outcomes suffer. Aligning incentives to customer experience metrics can reinforce the intended culture and make service quality a real operating priority rather than a branding aspiration.
Insurers are already adjusting to a shifting tax environment under the current administration. With the passage of the One Big Beautiful Bill Act (the Act) in July 2025, corporations remain subject to a 21% corporate tax rate. At the same time, the Act preserves near-term tax benefits that can matter to insurers with significant technology and operating investments, including immediate tax treatment for qualifying capital expenditures and domestic research and experimentation spending.
Cross-border provisions, however, are a more mixed story. Changes to the global intangible low-taxed income (GILTI) regime increased the effective tax rate in that area, although the impact may be partially offset for some taxpayers due to generally favorable adjustments to foreign tax credit rules. The Act also sets the base erosion and anti-abuse tax (BEAT) rate at 10.5%, which is lower than the Senate’s initially proposed 14%. Even at the lower rate, BEAT can remain a meaningful headwind—particularly for inbound insurers—because the underlying mechanics can still constrain capital and complicate how groups structure intercompany arrangements.
While the legislation provides some clarity domestically, important uncertainties remain. Proposed Section 899—focused on remedies against what the US deems unfair foreign taxes—was ultimately removed from the final bill after the United States reached a joint understanding with G7 countries regarding how the OECD’s Pillar Two global minimum tax rules would apply to US companies. The joint understanding contemplates a side-by-side approach that would exclude US-parented groups from the undertaxed profits rule and the income inclusion rule for both domestic and foreign profits. Even so, several practical questions remain unresolved, including implementation timing, technical mechanics, and whether and how relief may apply to US subsidiaries of foreign-parented multinationals.
Given that ambiguity, insurers should continue investing now in the underlying data and process infrastructure needed for Pillar Two tax modeling, compliance, and reporting—especially with the first information returns due by June 30, 2026. Additional regimes may further complicate planning and execution, including Bermuda’s corporate income tax and the US corporate alternative minimum tax, both of which can introduce incremental compliance burden and modeling complexity for insurers that are—or may become—subject to them. BEAT should also remain an active monitoring area, particularly for groups with material cross-border flows and reinsurance structures.
The insurance industry’s evolution has not been a sudden disruption, but a steady progression of changes that have gradually—and decisively—reshaped how carriers compete. Now, however, the pace is accelerating. Emerging and increasingly complex risks, disruptive technology, shifting customer expectations, and blurred ecosystem boundaries are combining to create a level of volatility that feels qualitatively different from prior cycles. As uncertainty rises, insurers may need to increase investment in the right mix of partnerships, people, and modern tools to stay resilient and profitable.
Heading into 2026, carriers can consider five practical priorities.
First, modernization and data quality need to move from aspiration to execution. Insurers are increasingly expected to scale digital and analytics-enabled capabilities while strengthening the foundational plumbing that makes them reliable. That means improving data quality and governance, building stronger data foundations for enterprise-wide visibility, and modernizing core systems to increase efficiency, reduce friction for customers, and manage risk with greater precision. In many organizations, this is inseparable from culture: modernization efforts tend to stall when teams are not empowered to test, learn, and adapt quickly.
Second, workforce transformation must be treated as a core strategic initiative, not a support function. The challenge is not only recruiting digital talent, but also ensuring the existing workforce can succeed in a more digital-first operating model. That includes upskilling and reskilling to bridge the gap between legacy expertise and emerging capabilities, redesigning roles and workflows so new tools are embedded into daily work, and aligning incentives so employees adopt and trust the new ways of working.
Third, insurers can accelerate progress by forging strategic partnerships. Technology providers, reinsurers, insurtechs, data partners, and adjacent service ecosystems can help carriers access capabilities faster than building everything internally. Done well, partnerships can also improve capital flexibility, expand distribution reach, enable new products, and strengthen risk mitigation—particularly when carriers are navigating new forms of volatility and rising customer expectations.
Fourth, customer-centricity must become more operational and measurable. Policyholders increasingly expect speed, convenience, and personalization—without sacrificing trust and empathy when stakes are high. Delivering on that expectation typically requires a more holistic journey view, where digital and human touchpoints work together rather than competing. The goal is not “more digital” for its own sake, but fewer handoffs, less repetition, and more consistent service that feels responsive and human.
Fifth, carriers may need to shift from reactive risk management to proactive prevention. As climate, cyber, and social risks grow in frequency and severity, insurers can use better data-driven insights, predictive modeling, and stronger stakeholder collaboration to reduce losses before they occur. This can include prevention-oriented services, improved monitoring, and partnerships that strengthen resilience—helping carriers protect customers while also protecting underwriting performance.
The future of insurance is already arriving. The question for carriers is not whether transformation is needed, but how quickly they can evolve business models, infrastructure, and talent in ways that sustain profitability in a more complex and uncertain environment.
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