Insurance Asset Allocation Outlook: Still Climbing, Just Slower

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Alyssa Irving - Fixed Income Portfolio Manager

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Amar Reganti - Fixed Income and Global Insurance Strategist

Members of our Insurance team share the key themes behind their cautiously optimistic outlook for the second half of 2025 and the implications for reserve-backing and surplus fixed income, as well as other major asset classes.

Key points

• Peak tariffs are likely in the past, but policy uncertainty is still a factor in our view on risk. We expect growth to climb higher than current market estimates for 2025, albeit lower than in 2024.
• We have a neutral view on duration and a slight overweight view on both IG corporates and securitized credit. The Fed and markets remain in a “wait and see” mode as they gauge the effect of tariffs on growth and inflation.
• We continue to see relative advantages to equity markets outside the US that are likely to benefit from fiscal stimulus, including Europe and Japan, and from a longer-term trend of declining US exceptionalism.
• We have an underweight view on oil, as we expect the market to be in surplus this year as OPEC slows production cuts. Tensions in the Middle East could upend this view.
• Downside risks include a supply-induced spike in inflation due to tariffs, a sustained rise in oil prices, policy uncertainty, and an escalation of geopolitical tensions. Upside risks include reasonable US trade deals with Europe and Japan and a jump in US productivity that increases growth potential without higher inflation.

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