Insurers Gear Up for 2024 with Increased Investment Risks and AI Integration

A recent survey by Conning reveals a notable shift in the U.S. insurance industry’s approach to investments for 2024. Insurance decision-makers display a strong sense of optimism about the investment markets for the upcoming year. They are prepared to embrace more investment risks, a sentiment driven by higher yields in traditional public market fixed-income sectors. This inclination towards risk-taking is further evidenced by insurers’ plans to increase allocations in private assets like private equity, private credit, private placements, and real assets such as infrastructure and real estate.

Amidst this heightened risk tolerance, insurers are also acknowledging the potential of artificial intelligence (AI) and machine learning (ML) tools in the investment process. Despite some concerns about the use of AI and ML, the majority believe the benefits of these technologies outweigh the risks. Many have already begun integrating AI tools into their investment strategies, marking a significant step towards modernizing investment management in the insurance sector.

The survey’s findings indicate that U.S. insurers are resilient and adaptable, ready to face new challenges after a year marked by significant inflation, falling bond portfolio values due to rising interest rates, and the rapid advancement of AI technologies. Furthermore, the growing complexity of managing insurance portfolios is leading more insurers to consider outsourcing some or all investment duties, adding another layer to their strategic planning for 2024.