A New Regime: Insurance Investment Strategies in 2025

Nearly five years after the pandemic, we find ourselves in a market and economic environment very different from that of the pre-pandemic era.

While we previously experienced a period of low inflation and low interest rates, today’s environment is marked by higher inflation and interest rate levels, driven by more restrictive monetary policy. In addition to these significant economic changes, insurance companies must also adapt to the new IFRS 17 accounting standards, which have been in effect since January 1, 2023. Furthermore, regulatory change surrounding climate will soon compel insurers to assess associated risks and increase measurement and reporting surrounding them.

Undoubtedly, these changes have forced insurers to reassess their asset allocation strategies to ensure a better alignment with the new IFRS 17 standards and better position themselves for the new market environment. For instance, strategies beyond traditional core fixed income (private debt, mortgages, infrastructure debt, global fixed income, etc.) have become more attractive and suitable asset classes for insurers due to their risk-return profile and characteristics that align well with liabilities.

Amid these developments, the pace of evolution across insurance companies is not uniform. Insurers are actively familiarizing themselves with a number of these strategies, and access to the solutions is not in all cases seamless. In certain cases, the use of derivative products can be beneficial, but there are governance and education considerations as well. Responsible investing is also a new field for many insurers, and integrating these concepts into their processes may require additional expertise and resources.

We encourage readers to also refer to Fiera Capital’s October 2021 white paper – Understanding IFRS 17 – which covered certain investment implications associated with the new standard.

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