Geopolitical risk tops insurers’ asset allocation | Australian Markets

Geopolitical stress has dethroned inflation as the highest concern driving Australian insurers to review their strategic asset allocation, in accordance with new analysis from Janus Henderson Investors.

The 2025 Australian Insurance Report discovered 82 per cent of insurers had reworked their asset allocation strategy as a a end result of the investment risk posed by geopolitical stress, overtaking each inflation and recession considerations.

The report, which covers 20 insurance coverage companies throughout common, life and health, discovered 47 per cent plan to increase investment portfolio risk over the following 12 months. Of the insurers presently underweight of their risk publicity, 70 per cent intend to increase in the identical period.

The analysis additionally highlighted the urge for food for personal markets has unfold to insurance coverage, with 55 per cent already holding publicity to non-public credit principally by means of world direct lending. Respondents indicated that they had been seeking to increase their credit allocations and increase 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, mentioned.

“Private credit is rising as a cornerstone of fixed income strategy, offering each 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 analysis additionally confirmed the dominance of each environmental, social and governance (ESG) and artificial intelligence (AI) within insurers’ portfolios, with 90 per cent now integrating ESG components and 12 per cent incorporating AI of their investment processes – with a additional 27 per cent implementing an AI pilot check within the following 12 months, representing a 4-times increase from 2024.