14 December 2022

Insurance Investment Outlook: Will old habits need to change in 2023?

Inflation has defined 2022 and will still play a major role in 2023, while various regulatory initiatives are also set to come into force next year.

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  • Charles Moussier - Head of EMEA Insurance Client Solutions
  • Elizabeth Gillam - Head of EU Government Relations & Public Policy

Explaining the process of positive change, John Maynard Keynes once remarked: "The difficulty lies not so much in developing new ideas as in escaping from old ones." Today, as they confront a fast-emerging series of major challenges, insurers may wish to keep this observation very much in mind.

The spectre of inflation is likely to linger in 2023. This alone should compel many insurers to reconsider their holdings as they bid to protect against the immediate and longer-term effects of purchasing power's dramatic erosion. Even assuming economic recovery will begin to unfold sometime next year, every investor has to give thought to which assets are most likely to outperform as a new economic cycle gets under way.

For insurers, however, this is likely to be only one part of a wider story. Further regulatory pressure is set to be heaped on the industry in 2023, with long-awaited Solvency II requirements expected be finalised and significant moves in relation to climate risk and greenwashing also in the pipeline.

As a result, insurers are poised to encounter a raft of new demands around issues such as risk management, sustainability and serving clients' best interests. This, too, is likely to reshape their thinking.

The key point in light of these and other developments is that "business as usual" could be an ill-advised course of action. Long-established practices are seldom quickly abandoned, as Keynes lamented, but the reality is that they are not often suited to situations defined by radical churn and change.

This is why insurers that are tempted to continue relying on conventional fixed income assets in uncertain times might instead need to recognise the likely benefits of diversification. The well-worn adage about the perils of putting all your eggs in one basket has rarely been more apt than it is today.

Charles Moussier, Invesco's Head of EMEA Insurance Cent Solutions, explores the consequent attractions of a multi-asset approach in '2023 Insurance Investment Outlook'. Making the case for novel thinking, he outlines why investment strategies that might have proven effective in the past may not prove so effective in the future.

Keynes famously captured the necessary mindset in another of his celebrated quotes: "When my information changes," he said, "I alter my conclusions." Reflecting this ethos, Moussier argues that now is the time for insurers to be forward-thinking and flexible.

View the 2023 Insurance Investment Outlook here

View our full range of 2023 Investment Outlooks here

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