Geopolitical risk tops insurers’ asset allocation concerns

Geopolitical tension has dethroned inflation as the top concern driving Australian insurers to review their strategic asset allocation, according to new research from Janus Henderson Investors.

The 2025 Australian Insurance Report found 82 per cent of insurers had reworked their asset allocation strategy as a a result of the investment risk posed by geopolitical tension, overtaking both inflation and recession concerns.

The report, which covers 20 insurance firms across general, life and health, found 47 per cent plan to increase investment portfolio risk over the next 12 months. Of the insurers currently underweight in their risk exposure, 70 per cent intend to increase in the same period.

The research also highlighted the appetite for private markets has spread to insurance, with 55 per cent already holding exposure to private credit mostly through global direct lending. Respondents indicated that they were looking to increase their credit allocations and expand into asset-backed lending (ABL).

“Insurers are clearly shifting gears. The move from defensive positioning to proactive portfolio re-risking reflects a broader industry trend toward embracing private markets and seeking differentiated sources of return,” Matt Gaden, Head of Australia at Janus Henderson Investors, said.

“Private credit is emerging as a cornerstone of fixed income strategy, offering both yield and diversification.

“At Janus Henderson, we’re proud to partner with insurers globally to help them navigate this evolving landscape. Our deep expertise in fixed income and partnership with Victory Park Capital in private markets positions us well to support clients in achieving their investment objectives.”

The research also showed the dominance of both environmental, social and governance (ESG) and artificial intelligence (AI) within insurers’ portfolios, with 90 per cent now integrating ESG factors and 12 per cent incorporating AI in their investment processes – with a further 27 per cent implementing an AI pilot test within the next 12 months, representing a 4-times increase from 2024.