Most U.S. insurers plan to take on more investment risk in 2024, and said the risks associated with the use of artificial intelligence (AI) in the investment process are outweighed by the potential benefits of the technology.
According to results of a survey of 300 investment decision-makers by Conning, an investment firm that serves the insurance industry, 80% are optimistic of the investment climate this year and 62% are willing to take on more investment risk. Results were slightly lower than last year when 64% said they anticipated an increase in investment risk tolerance.
“Years of historically low interest rates demanded that insurers consider unfamiliar asset categories to help improve portfolio yields,” said Matt Reilly, Conning’s head of insurance solutions and co-author of the survey report, in a statement. “The increase in rates has helped make those more traditional investments appealing again. While many insurers appear poised to take advantage of those yields, they also remain committed to adding to less traditional assets such as real estate, private credit and private equity.”
Among the top portfolio concerns were inflation, the domestic political environment, and the impact of monetary policy. Domestic political environment and AI were added to the latest survey as concerns.
Despite some concerns related to the use of AI and machine learning in the investment process—such as ethical considerations, lack of human oversight, unexpected market changes, and cybersecurity—three out of four respondents said they were currently using or piloting AI/machine learning use in investments.
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