Insurers are more pessimistic about the investment landscape for 2025, with increased uncertainty leading to greater restraint in carriers’ investment planning.
Which isn’t to say that they’re not still optimistic — they’re just less so than they have in years past. Of the 310 insurance professionals who responded to Conning’s annual insurance investment risk survey, 77 percent remain optimistic about the 2025 markets, down from 80 percent last year.
Conning’s insurance solutions group head Matt Reilly told Institutional Investor that insurers “remained optimistic but levels of pessimism seem to be higher,” adding that while “insurers still expect to increase investment risk,” they’re “looking to add risk to their portfolios at a lesser rate.”
After ranking as the top investment concern for U.S. insurers in Conning’s previous three annual surveys, inflation has plummeted to seventh place this year (the survey was conducted in November so that may have changed). The domestic political environment now emerged as insurers’ top concern, even after the election.
P&C and life insurers identified portfolio yields, market volatility, geopolitical events, and the impact of artificial intelligence, in that order, as their leading concerns.
Apprehension and concern aside, insurers remain keen to up their exposure to private market assets. Reilly said that “insurers still expect to” expand “beyond their more traditional fixed income portfolio holdings to include greater exposure to private assets, in order to achieve yield and diversification.”
When the survey was conducted in November, 71 percent of respondents held between 5 percent and 20 percent of their portfolios in private markets. The majority of insurers — 63 percent — plan to have between 10 percent and 25 percent allocated to private assets in the next two years. But of the subset of carriers that expect to have 25 percent or more in private assets dropped to 17 percent in this year’s survey, down from the 25 percent who projected this level in the prior year’s survey.
While private assets are not without their own risks, Reilly noted that “concerns over private assets seem to be abating.” Still, 31 percent of insurers remain “very concerned” with private assets’ impact on liquidity.
