Insurance equities may be headed for more downward pressure as market participants rethink the potential impact of artificial intelligence on the industry, according to a fresh strategy note from Barclays analyst Emmanuel Cau.
Cau told investors that the sector's de-rating "is only just starting," and warned valuations might have another "5-25% more to go" as concerns mount over technology-driven disruption and softer earnings momentum.
The bank's research piece argues that AI-related developments are creating a wide divergence in stock performance across the financials complex. Barclays wrote that "AI disruption is driving extreme stocks dispersion," with those companies showing "strong EPS momentum" rewarded by the market while others are being sold off "indiscriminately."
Within the financial sector, Barclays also observed that the market has framed part of the investment debate as a "Banks vs Insurance" trade, and suggested insurers are increasingly vulnerable to this rotation.
Barclays highlighted specific concerns about how AI could alter more profitable pockets of property and casualty business. The note emphasized that fears of AI reshaping motor and broader personal lines are "real." To illustrate the scale of exposure, the bank noted that P&C makes up about 60% of insurers' market capitalisation, with personal lines representing roughly 54% of that portion and motor accounting for approximately 35-40% of global P&C revenues.
Beyond AI risks, Cau signalled that the industry faces headwinds from conventional cyclical dynamics. He pointed to "mounting cyclical pressures from P&C pricing and sub-par earnings momentum," forecasting that insurers are likely to deliver around 6% EPS growth versus an 11% market median.
Barclays added a caveat on timing: while technologies such as autonomous vehicles and AI-enabled insurance platforms are unlikely to force immediate reductions in earnings forecasts, investor willingness to "fight the AI trade" appears limited, which could amplify downward pressure on insurers perceived as exposed.
The note frames the current period as one in which both structural technology questions and near-term cyclical challenges are weighing on investor sentiment toward insurance stocks.