While the volatile months after President Trump’s inauguration have seen “significant changes” to the economic, investment and political landscape in the US, a significant minority of the audience (43%) at Insurance Asset Risk’s Insurance Risk and Capital Americas 2025 conference in New York today (17 September) said that claims of the birth of a ‘new world order’ in recent months have been “overblown”.
Jennifer Bender, global chief investment strategist at State Street Investment Management, went on to add that claims the second Trump presidency had seriously wounded US exceptionalism had been overcooked.
“We are seeing dents in US exceptionalism, certainly, perhaps over the short-term, but I don’t think, over the long-term, that the exceptionalism born out of our World War Two heritage is over”, Bender added.
Peggy Huang, group chief investment officer at Ceres Life/CC Capital, went on to tackle the range of risks facing insurance investors in an investment universe still not short on volatility.
“You can’t invest while worrying about everything all at once,” Huang commented. “There are always things to worry about. If you had predicted in advance all the things that have happened in the past few years, then you would have run for the hills, but look where the market is today, you have to run balanced risks and understand what to buy.”
Amit Agrawal, chief investment officer at Axa XL, noted though that concerns over interest rate volatility were merited, especially if rates remain higher for longer, and if the Fed’s independence continues to be challenged from the sidelines by a president seemingly intent on imposing his own political will of the central bank’s board.
Private assets
On a panel that considered the ongoing trend of insurance investors backing private assets, private equity (PE) financing was named as both a top opportunity trend and an emerging risk for insurers.
Panellist Felix Lurye, senior managing director, head of ALM and investment strategy at Guardian Life, highlighted both participation in the AI ecosystem and participation in the PE financing ecosystem as top trends at the moment, noting that there are both traditional ways to participate in PE and multiple other new routes into financing the asset class.
Anisha Gangwani, chief investment officer at Legal and General Retirement America (LGRA), agreed that PE financing was an area of opportunity, however she also noted that it was an area of emerging risk as well, due to its popularity among investors.
Real estate
The real estate sector, the event heard, is continuing an ongoing transformation in response to the increasingly interconnected nature of the world, with retail continuing an unexpected revival.
“We must think longer-term about how these forces of increased interconnection are going to change real estate,” Ravi Anand, portfolio manager, head of private real estate credit at Wellington Management, commented.
Anand went on to note that the retail sector had begun to thrive again because it had managed to redefine itself.
“Eight or nine years ago, before the pandemic, bricks and mortar real estate was declared dead, but it has reinvented itself. On top of that, the amount of retail that was destroyed during that time was considerable, so demand is now higher, and it is part of the pie that is growing now.”
Regulation
The plans of the NAIC, the US insurance regulator, to change the correlation between fixed income and equity in a set of upcoming reforms, could prompt capital charges for alternative assets to rise in future years, Xiaowei Han, vice president, head of ALM at TIAA, told the conference, however the principle-bond based definition and the risk-based capital (RBC) reforms continue to dominate insurers’ thoughts.
Jon Godfread, insurance commissioner for North Dakota and current NAIC chair, said at the conference that even the NAIC itself has had a track record of not always talking about RBC competently and confidently.
As other jurisdictions hold up Solvency II as the ‘gold standard’, Godfread added that a lack of clarity around the NAIC’s framework “hurts our credibility” and added that finding a way to develop a standard for how the regulator talks about its framework was part of the reason for developing the commissioner-led RBC Model of Governance Task Force.
Secondly, he said, the NAIC is also in the middle of an RBC gap analysis, in order to “see where we maybe need to make some adjustments to align with the ‘equal capital for equal risk’ mantra that we're bringing to the RBC.”
A panel at the conference also considered the recent ‘noise’ in the UK around funded reinsurance, which panellists considered to be a slight overreaction.
The speakers added that funded re should be looked at through the lens of the ‘prudent person principle’, and that the kinds of reinsurers and insurers looking at such deals are sophisticated enough to manage them as a variety of collateralised asset on their balance sheets.