Domestic political environment replaces inflation as top investment portfolio concern for US insurers

Written by Adam Cadle

12/02/2025

US insurers’ inflation concerns have faded as the domestic political environment has replaced it as their top investment portfolio worry, according to Conning’s annual Insurance Investment Risk survey conducted in November 2024.

Inflation was the top investment portfolio concern for the past three surveys, but fell to seventh place, the latest survey revealed. After domestic politics, P&C and life insurers identified portfolio yields, market volatility, geopolitical events, and the impact of AI, in that order, as their leading concerns.

“A greater level of uncertainty has likely led to greater restraint in insurers’ investment planning,” Conning’s insurance solutions group head, Matt Reilly, stated.

“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.”

Sixty-three per cent of respondents in Conning’s 2023 survey expected to increase exposure to investment-grade fixed income. Six other categories saw at least 50% of respondents planning to increase exposures. However, the latest survey showed that none of the 12 asset classes listed saw more than 47% of insurers expecting to add exposure and, generally, their responses were higher in the “no change” or “decrease” options in comparison to last year.

Insurers continued to express interest in adding to private asset exposures. Currently, 71% of respondents hold between 5% and 20% of their portfolios in private markets. In the next two years, the majority – 63 % – expect to have between 10% and 25% in private assets. There is some tempering at the higher end of expectations: 17% expect to have 25% or more in private assets, down from the 25% 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% of insurers saying they are “very concerned.” The liquidity concern is notable as insurers stated they were very comfortable with liquidity overall; 92% of respondents said they are confident their companies are well positioned to meet liquidity needs in the year ahead.

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% – said they expect to increase duration this year, and only 14% expect to decrease.

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

Conning’s latest survey was completed by 310 investment decision-makers in the US insurance industry.

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