European insurers have outperformed the broader market since the Iran War began on Feb. 27, registering a 7% decline versus a 9% fall in the Stoxx Europe 600 and an 11% drop in European banks, according to a research note from RBC Capital Markets.
That relative strength stems from several structural attributes of the industry. First, insurance consumption is often non-discretionary, giving revenue streams greater stability in turbulent times. Second, many insurers entered the period with solid balance sheets. Third, insurers typically have the ability to re-price products if inflationary pressures rise, helping protect earnings and margins when input costs climb.
However, the performance pattern inside the sector has not been uniform. Data cited by the brokerage from Datastream show clear dispersion across sub-sectors since Feb. 27:
- UK Motor stocks have rallied, gaining 6.8%.
- UK Life insurers have been the weakest segment, falling 9.8%.
- Reinsurers are down 4.9%.
- Composite insurers have slipped 8.0%.
At the individual stock level, relative moves have been pronounced. Bloomberg data indicate Beazley has outperformed the Stoxx 600 by 54% since Feb. 27, while XPS underperformed by 20% and Standard Life lagged by 13% on the same relative basis.
RBC identifies several drivers of these intra-sector differences. UK Life companies have higher asset leverage than many peers, making them more sensitive to market swings. Standard Life, for example, shows asset leverage of 178.7x when policyholder assets are included at year-end 2025, compared with Legal & General at 50.4x and Aviva at 9.5x. Larger movements in UK interest rates and strong share price gains in the prior year also contributed to UK Life’s underperformance.
Inflation expectations have shifted since the war began. Break-even inflation rates have risen sharply, with increases in the UK outpacing those in continental Europe and the United States, although all remain below their post-COVID highs, according to Bloomberg data as of March 25.
Historical stress evidence referenced by RBC suggests the sector has held up better in past downturns. During the COVID-19 drawdown, forward earnings per share for insurers fell a maximum of 16%, versus a 27% decline for the broader Stoxx 600, per Datastream.
Solvency positions remain generally comfortable after accounting for year-to-date market moves. Using year-end 2025 figures, RBC estimates Munich Re sits at 295% solvency versus a target range of 175-220%, while Standard Life is at 175%, inside its 140-180% target interval.
On shareholder returns, the sector trades at an average forward dividend yield of 7% with an average payout ratio of 64%. RBC singled out HNR1, MUV2, ALV and CSN for their strong dividend histories and average payout ratios of around 55%, a metric the brokerage says supports confidence in payout sustainability.
Valuation multiples have expanded modestly. As of March 23, the sector’s 12-month forward price-to-earnings ratio stood at 11.4x, above its long-term average of 10.5x. Individual stock forward P/Es vary widely, from 6.1x for Conduit Holdings to 13x for Admiral, according to Bloomberg.
RBC cautions the main downside would be a severe recession coupled with lower long bond yields and credit defaults. In that scenario, the brokerage expects reinsurers to outperform and life insurers to underperform.
Sector impact summary
- Insurance sector: relative resilience but divergent sub-sector performance.
- Banks and broader equity markets: larger declines compared with insurers since Feb. 27.
- Fixed income and inflation markets: rising break-even inflation rates and shifting yields are relevant to insurer asset and liability positions.