Israeli Insurers Lag European Solvency Ratios Despite High Profitability
A report by S&P Global Ratings reveals that Israeli insurance companies' average solvency ratio stood at 159% at the end of 2025, trailing European peers. However, strong profitability and market concentration are expected to sustain stable credit profiles through 2027.
Israeli insurance companies report high profitability, yet their capital buffers lag behind international standards, according to a report published by S&P Global Ratings. The analysis shows that the average solvency ratio of Israeli insurers stood at approximately 159% at the end of 2025, compared to roughly 230% for a benchmark group of 36 European insurance companies.
S&P clarifies that the comparison is not fully direct because capital requirements differ between Israel and Europe. Part of the gap stems from the European sample including mutual insurance companies, which typically maintain higher capital buffers. In contrast, Israeli insurers carry legacy life insurance liabilities requiring substantial capital and allocate a higher share of their assets to equities, thereby increasing regulatory capital demands.
Despite the gap with Europe, S&P projects that Israeli insurance companies will maintain a stable credit profile through 2027, largely supported by their profitability. However, the rating agency warns that ongoing geopolitical risks and military conflicts could increase market volatility and affect investment portfolios. Israeli insurers hold 22% of their investment portfolios in equities, compared to just 10% in Europe, heightening vulnerability during market downturns.
Market concentration remains a key profitability driver, with the five largest insurance groups—including Phoenix Holdings and Harel Insurance & Finance—accounting for 78% of industry premiums. This concentration helps insurers maintain pricing discipline and prevents destructive price wars, though it limits fierce price competition that could benefit consumers. Meanwhile, the auto insurance sector has seen easing rates following years of sharp increases, driven by greater price transparency and digital sales channels.
Beyond traditional insurance, Israeli groups benefit from managing public savings through pension funds and provident funds, following the Bachar reform. This activity generates steady management fee revenue with limited capital requirements. Looking ahead, S&P expects Israeli insurers to sustain adequate profitability over the next two years, supported by asset management and credit expansion, despite geopolitical risks and market headwinds.
