79% of insurance professionals increase allocations to inflation linked bonds

Written by Adam Cadle

30/01/2024

Seventy-nine per cent of insurance investment professionals have increased their allocation to inflation linked bonds over the past 12 months, a new global study by Ortec Finance has revealed.

Fifty-four per cent said they have increased allocations to money market accounts to manage inflation risk and 47% have invested more in indirect (listed) real estate. Nearly two out of five (38%) and one in five (21%) said the funds they help to manage have increased their allocation to gold and infrastructure respectively, to help hedge against inflation.

Despite taking these steps, 51% of insurance investment professionals said they are very concerned about the threat of stagflation, and another 47% said they are quite concerned.

Hamish Bailey, managing director UK, and head of insurance & investment, Ortec Finance, said: “Although inflation is falling, our survey shows that investors still see it as a major threat to their portfolios. It is clear that many have been proactive in taking steps to ensure they are adequately hedged, and these are evolving in terms of planned asset allocation for 2024.

"However, with rising prices and pressure on economic growth, the threat of stagflation is real, and this is clearly a concern for insurers.

“In these volatile and challenging times, insurers need to monitor the many risks facing their investment portfolios and have tested strategies in place for managing them.”

Ortec Finance commissioned independent research company Pureprofile to interview 100
investment management professionals at life insurance companies, Lloyds of London insurers and reinsurers and at fund managers who support insurers in November 2023. Survey respondents are located in the UK, the USA, France, Germany, Hong Kong, Italy, Netherlands, Singapore and South Korea. Collectively the organisations they work for manage around $5trn.

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