The global property and casualty market is entering a normalisation phase after several years of exceptional price-driven growth, while climate change presents a growing affordability challenge, according to an Allianz report.

“After several years of sharp rate increases across motor, property and specialty lines, pricing has started to normalise in some regions, while claims costs, although still elevated, are no longer accelerating at the pace seen in 2022 and 2023,” the Allianz Global Insurance Report 2026 says.

Property and casualty premium grew 3.8% last year to reach €2.32 trillion ($3.76 trillion), with North America accounting for 52% of the total.

The report warns climate change is turning affordability into a structural challenge for the industry, with insured natural catastrophe losses rising 5%-7% annually in real terms while higher premiums are increasingly colliding with weakening household purchasing power.

“The result is widening protection gaps, pushing lower-income households out of coverage. As affordability deteriorates, more climate losses are shifting onto already strained public balance sheets.”

Preserving long-term insurability will require adaptation incentives, resilience-focused underwriting, targeted affordability mechanisms and deeper public-private risk-sharing frameworks, supported by investment in adaptation and resilient infrastructure, the report says.

Allianz also says geopolitics and fragmentation is raising costs and adding operational complexity for insurers while increasing demand for protection and resilience.

The report, which also includes life and health insurance, says total global premium increased 7.1% last year to €6.9 trillion ($11.2 trillion).

The overall market is expected to expand by 5.3% annually over the next 10 years, with property and casualty to grow 4.7%.

North America is likely to remain the dominant profit and growth pool, with the Allianz outlook for the region more optimistic compared with a year ago across all three business lines, but particularly in P&C.

“Three forces are driving this shift: the expected AI investment boom and associated productivity gains, continued increases in household spending on protection – especially in health insurance – and elevated interest rates supporting life and annuity products.”