Conning Investment Risk Survey: U.S. Insurers Eye Greater Private Market Exposure; Optimism Cools on Markets, Adding to Overall Risk

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Inflation Concerns Fade as Domestic Political Environment is Top Portfolio Concern

HARTFORD, Conn.--(BUSINESS WIRE)--
While U.S. life and P&C insurers are willing to assume increased investment risk for the third consecutive year, their market optimism is tempered as inflation is replaced by concerns about the domestic political environment, portfolio yield, market volatility, geopolitical events, and the impact of artificial intelligence. Indeed, their investment plans for 2025 reflect more restraint given greater uncertainty, according to the annual Conning Insurance Investment Risk survey, conducted in late November 2024 and completed by 310 investment decision-makers in the U.S. insurance industry.

“A greater level of uncertainty has likely led to greater restraint in insurers’ investment planning,” said Matt Reilly, managing director and head of Conning’s Insurance Solutions group and author of the survey report. “However, insurers still expect to increase investment risk, expanding beyond their more traditional fixed income portfolio holdings to include greater exposure to private assets, in order to achieve yield and diversification.”

New Investment Concerns in 2025

The majority – 77 percent – of insurance professionals surveyed remain optimistic about the 2025 investment environment, slightly down from 80 percent last year.

Inflation, which ranked as the top investment portfolio concern for U.S. insurers in Conning’s past three surveys, fell to seventh place this year, a significant decline. The domestic political environment emerged as insurers’ top concern, even after the election results were final.

After domestic politics, 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.

Signs of Investment Restraint but Interest Remains in Private Assets

Respondents also indicated they do not anticipate a rush into particular asset classes, another sign of restraint compared to the prior year’s survey.

For example, 63 percent of respondents in Conning’s 2023 survey expected to increase exposure to investment-grade fixed income, not surprising given the opportunities apparent from rising yields in late 2023. And six other categories saw at least 50 percent of respondents planning to increase exposures.

However, Conning’s latest survey indicated none of the 12 asset classes listed saw more than 47 percent of insurers expecting to add exposure and, generally, their responses were higher in the “no change” or “decrease” options in comparison to last year.

Meanwhile insurers continued to express interest in adding to private asset exposures. Currently, 71 percent of respondents hold between 5 percent and 20 percent of their portfolios in private markets. In the next two years, the majority – 63 percent – expect to have between 10 percent and 25 percent in private assets. There is some tempering at the higher end of expectations: 17 percent expect to have 25 percent or more in private assets, down from the 25 percent who projected this level in the prior year’s survey.

Private assets are not without their own risks, however, and chief among them is their impact on liquidity with 31 percent of insurers saying they are “very concerned.” The liquidity concern is notable as insurers stated they were very comfortable with liquidity overall; ninety-two percent of respondents say they are confident their companies are well positioned to meet liquidity needs in the year ahead.

Expecting to Increase Duration

A new section of the survey asked insurers about their portfolio interest rate positioning. While insurers expect to increase exposure to shorter-duration floating-rate assets, overall duration is expected to increase, suggesting the duration barbell will be popular this year. A number of insurers in 2024 sought to extend duration in the portfolio, a strategy that appears popular for 2025: nearly two thirds of insurers – 64 percent – said they expect to increase duration this year, and only 14 percent expect to decrease.

In the year ahead, 53 percent of respondents report plans to increase exposure to floating-rate strategies in 2025, and an additional 25 percent expect their exposure will remain the same. A majority of respondents noted the U.S. Federal Reserve’s policy affects their investment strategy and that it has a significant impact on floating-rate strategies.

To learn more about this year’s survey findings, reference the 2025 results summary and interactive graphics on Conning’s website: https://www.conning.com/about-us/insights/risk-survey-2025

About Conning

Conning is a leading investment management firm and with affiliates has nearly $170 billion in global assets under management as of December 31, 2024.* With a long history of serving insurance companies and other institutional investors, Conning supports clients with investment solutions, risk modeling software, and industry research. Founded in 1912, Conning has investment centers in Asia, Europe and North America. Conning is part of the Generali Investments platform, which has approximately $740 billion in assets under management.**

* As of December 31, 2024, includes Conning, Inc., Conning Asset Management Limited, Conning Asia Pacific Limited, Conning Investment Products, Inc., Goodwin Capital Advisers, Inc. (collectively, “Conning”), and Conning subsidiaries Global Evolution Asset Management A/S, Octagon Credit Investors, LLC, and Pearlmark Real Estate, LLC and its subsidiaries (collectively “Affiliates” and together with Conning, “Conning & Affiliates”).

** Generali Investments Holding S.p.A., data as at end of Q2 2024 gross of double counting. Generali Investments is part of the Generali Group, which was established in 1831 in Trieste as Assicurazioni Austro-Italiche. Generali Asset Management S.p.A. Società di gestione del risparmio, Generali Real Estate S.p.A. Società di gestione del risparmio, Infranity SAS, Sosteneo S.p.A. Società di gestione del risparmio, Sycomore Asset Management, Aperture Investors LLC (including Aperture Investors UK Ltd), Lumyna Investments Limited, Plenisfer Investments S.p.A. Società di gestione del risparmio, Conning, Inc., Conning Asset Management Limited, Conning Asia Pacific Limited, Conning Investment Products, Inc., Goodwin Capital Advisers, Inc. (collectively, “Conning”) and its subsidiaries (Global Evolution Asset Management A/S - including Global Evolution USA, LLC and Global Evolution Fund Management Singapore Pte. Ltd- Octagon Credit Investors, LLC, Pearlmark Real Estate, LLC and PREP Investment Advisers LLC) are part of Generali Investments, as well as Generali Investments CEE. Please note that the countries refers to the countries where the different funds of the asset management companies that are part of Generali Investments are registered for distribution. Please note that not all funds are registered in all the countries and not all the asset management companies are licensed to operate in such countries. Generali Investments Holding S.p.A. is the holding company holding, directly or indirectly, a majority of the shares in the asset management companies listed above.