Morgan Stanley Favors AXA, SCOR, Generali Ahead of Major Solvency II Reforms

Analysts at Morgan Stanley are highlighting opportunities in the European insurance sector as it prepares for the most significant overhaul of the Solvency II framework since its inception, set to take effect in late January 2027.

Capital Release Expected from Reforms

Morgan Stanley estimates the regulatory changes could free up approximately €16 billion or more in capital for the insurers it covers. This would be equivalent to an average uplift of roughly 9 percentage points to their reported solvency ratios. For the European insurance industry as a whole, the bank projects the capital relief could reach into the mid- to high-double-digit billions of euros.

While this incremental capital is intended to help fund economic growth across Europe rather than being earmarked for direct shareholder returns, Morgan Stanley notes that the changes will provide added support for the insurers' underlying business growth.

Ad

Top Insurance Picks

Morgan Stanley identified three companies as being particularly well-positioned to benefit from the shifting regulatory landscape:

• AXA (AXAF.PA): The firm's top pick in the sector. Analysts see the greatest potential for upside to consensus earnings, driven by improved sentiment around its XL division, ongoing AI efficiencies, and strong momentum in its Life and Health businesses. These factors are expected to help narrow the company's valuation gap with its peers.
• SCOR (SCOR.PA): The reinsurer is expected to be one of the biggest beneficiaries of the Solvency II review, which should push its solvency ratio well above the upper end of its target range. With overhangs related to its former suitor Covea now largely resolved, Morgan Stanley sees a clearer path to an improved earnings trajectory and enhanced cash returns to shareholders, maintaining an Overweight rating.
• Generali (GASI.MI): The Italian insurer is considered a relative beneficiary of the changes, supported by its scale and growth initiatives. A key question for investors is whether the capital benefit will be fully fungible to the parent company. If so, analysts note there could be increased scope for improved shareholder returns, given Generali's current payout ratio of approximately 67% sits below the 75% or higher seen at multi-line peers.