Insurers Adapt: Balancing Risk and Reward in Uncertain Times

Insurers are facing a tough year ahead, with inflation being a major concern. A recent survey shows that most insurers are being cautious with their investments. Only a small group, about 12%, plan to take on more risk in 2025. However, there is a growing interest in private markets. Nearly a third of insurers want to invest more in private markets, while more than half plan to keep their current investments. Private credit, infrastructure, and multi-alternative strategies are seen as the most promising opportunities. Public markets are still important, with 73% of insurers planning to maintain their current investments and 21% looking to increase them. Insurers are also changing how they operate. Many are moving away from relying solely on their in-house teams and are adopting hybrid models that combine internal expertise with external partners. This shift is supported by significant investments in technology. Additionally, insurers are focusing more on capital management. Over the next year, many plan to use reinsurance sidecars, increase the use of third-party capital, and expand their captive management capabilities. This focus on capital management is driven by the need to diversify income, optimize balance sheets, and access non-dilutive sources of capital. Sustainability remains a priority for insurers. For the second year in a row, clean energy infrastructure is seen as the most attractive opportunity for sustainable investing, followed by core infrastructure and green bonds.