Australian insurers displaying greater investment risk appetite

Written by Adam Cadle

15/08/2024

Australian insurers are displaying more willingness to take on greater investment risks as inflation and recession fears subside, according to the 2024 Australian Insurance Report by Janus Henderson Investors.

Forty-three per cent of insurers are now aligning their investments with their risk budgets, an increase from 13% in 2023.

Concerning their strategic investment priorities, insurers identified diversification (80%) as the most key factor, followed by interest rates (74%) and inflation (49%).

“The drive to diversify portfolios is evident, with a strong focus on enhancing fixed income allocations, particularly through increased investment in private debt,” Janus Henderson Investors head of Australia, Matt Gaden, stated.

The report also revealed that 45% of insurers surveyed plan to increase their global private debt investments, while 39% intend to expand their Australian private debt allocations in the next 12 months.

Seventy-five per cent of insurers have recently reviewed or are currently reviewing their SAA strategies and ESG factors are now included in the portfolios of 84% of insurers, an increase from 70% in 2023.

Insurers are divided on their future equity allocations, with 24% expecting to increase and 27% expecting to reduce their holdings in Australian equities. In global equities, 18% of respondents anticipate increases, while another 18% foresee decreases.

Almost a quarter of insurers are currently piloting AI solutions in their investment processes, a rise from none in 2023.

The report gathered insights from 40 insurance firms, representing a broad spectrum of general, life, and health insurers. Sixty-three per cent of respondents were investment management decision-makers. The research was conducted in May 2024.

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