BY CLICKING ON “I AGREE”, I DECLARE I AM A WHOLESALE CLIENT AS DEFINED IN THE CORPORATIONS ACT 2001.
What is a Wholesale Client?
A person or entity is a “wholesale client” if they satisfy the requirements of section 761G of the Corporations Act.
This commonly includes a person or entity:
Geopolitics
Persistent geopolitical tension is rewiring supply chains and amplifying inflationary pressures globally. As resources are reallocated, we could see additional demand mismatches, more local sourcing, and more market fragmentation.
Inflation
Inflationary pressures are likely to persist despite moderating recently. A higher inflationary environment challenges insurers’ profitability and impacts their assets and liabilities.
Fiscal policy
Fiscal policy has turned into a meaningful headwind while global growth decelerates. Active fiscal policy propelled the global economy through the pandemic, but this support has been largely withdrawn across most major economies.
The Great Moderation, the four-decade period of largely stable activity and inflation, is behind us. Production constraints are fueling inflation and macro volatility. Central banks are on course to overtighten policy as they try to tame inflation. The new regime of greater macro and market volatility is challenging insurers’ investment strategies. Insurers need a new investment playbook which calls for them to be more flexible and discerning in their portfolio strategies.
With idiosyncratic risks rising, more granular research will be required on individual sectors, regions, and sub-asset classes. Implementing portfolio decisions via broad exposures may not be the best approach for insurers in the new regime.
While insurers need to be more dynamic and nuanced in their investment approach, many will be constrained by an ability to realize investment losses. This will require careful analysis of breakeven periods and loss budgeting.
We have identified five themes that are reshaping the global insurance industry in 2023: