The [i3] Insurance Investment Forum 2023 was held on 6 June at the Intercontinental Double Bay in Sydney. Participants discussed the role of inflation-linked bonds, structural vs cyclical inflation, asset-liability matching and alternative assets.
The forum focused on the key theme of transformation in insurance investing. After a decade of falling and extremely low interest rates, the trend has now reversed and bonds have become interesting again.
Although headline inflation is still high, much of it seems to be concentrated in fuel and energy prices, which could mean it will normalise at some point. Meanwhile, investors can get an Australian 10-year government bond with a yield of 3.5 per cent, unheard of in recent years.
So what does this mean for the investment portfolios of insurers? Do they unwind their recent venture into alternative assets in favour of fixed income? Or do they maintain a more diversified portfolio, in case a prolonged recession will engulf global economies? Do they take on more private market exposure?
There are many choices to make, but what is certain is that some transformation will be required to deal with the current market conditions.
At the 11th [i3] Insurance Investment Forum, we addressed these questions and more, including:
- The impact of sustained higher inflation on portfolios
- Benefits of asset liability matching versus an absolute return approach
- Capital efficiency of investments
- Decarbonisation and climate change
- The role of inflation-linked bonds
- Private market allocations