Top investment considerations for insurers 2024
We identify the six considerations we believe insurers should keep at the forefront of their investment strategies as they look to the future.
Insurance companies have weathered a prolonged storm of challenges that strained both the asset and liability sides of their balance sheets, including repeated periods of macroeconomic uncertainty and volatile business performance over the past several years.
With a difficult operating backdrop, many insurers have leaned on their investment portfolios to support overall corporate objectives, making the composition of assets and their contribution to returns and volatility increasingly important. As a result, insurers have started to think more deeply about portfolio risk within the context of broader business strategy, including evaluating how best to optimise the asset portfolio to deliver the most meaningful results. We see six important themes that insurers should consider as part of an iterative optimisation process.
Top considerations for insurers in 2024
Higher treasury yields, risk premium compression, and the drive to maximise yield mean insurance investors may benefit from reassessing the portfolio balance between equity, fixed income, and alternatives.
While cash and short-duration fixed income assets are yielding significantly higher levels of income than they have over the past decade, insurers may benefit from strategies that lock in appropriate yields for longer within the risk tolerance of their primary business. Key considerations include being mindful of liquidity needs, the duration of an insurance company’s liabilities, its sources of liquidity and the strategic prioritisation of sources when raising capital.
As bank retrenchment deepens lack of supply, borrowers are being driven to seek out alternative sources of credit. Private credit managers have been responding to borrowers’ needs, gaining returns while providing rapid execution and ongoing partnership, making the space potentially attractive for insurers able to act as patient providers of capital.
With reviews of regulatory frameworks at varying stages across many regions, it is important for insurers to keep abreast of upcoming changes and their potential impact on their investments.
Geographic divergences have implications for sustainable investing ranging from the regulatory landscape and guidelines to the contours of climate risks – many insurers are navigating sustainability considerations, risks, and opportunities to drive value.
It is important to structure governance and guidelines to grant portfolios the flexibility needed to capitalise on quickly shifting investment opportunities.
Top considerations for insurers 2024
Download the report to learn how insurers can optimise their portfolio in 2024 and beyond.
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