Tariffs and market volatility are pushing insurance companies to adjust investment strategies, emphasizing long-term stability, risk management, greater liquidity and selective opportunities in private credit, infrastructure debt and other alternative assets.
It’s well known that the big institutions, rather than retail investors, are the market movers. Insurance companies held about $8.5 trillion in total cash and invested assets at the end of 2023, the most recent year for which the National Association of Insurance Commissioners (NAIC) has released data.
That means insurers’ investment departments have a potentially huge effect on market activity.
Because of their size, insurers don’t just react to market changes; they can actually shape them.
Their decisions around allocating capital to fixed income, equities, private credit and other asset classes often ripple across broader financial markets, influencing liquidity, valuations and even the behavior of other institutional investors.
So are they making any portfolio changes in the face of the widespread volatility in 2025?
Taking a Cautious Approach
“Life and annuity companies are unlikely to make significant changes to their investment strategies, even amid looming tariffs and ongoing uncertainty in global markets,” says Arik Rashkes, head of the financial institutions group at Solomon Partners, a New York company whose advisory clients include those in the financial services industry.
This cautious stance reflects the broader priorities of life and annuity companies, which focus on long-term stability rather than short-term market fluctuations.
Even in a volatile market, their core investment philosophies stay anchored to risk management and liability matching.
How soon are you retiring?
What is your goal for purchasing an annuity?
Select all that apply
Aligning Investments with Liabilities
“Given their typical approach of aligning investments with the duration of their liabilities, any adjustments are expected to be modest, aimed at maintaining a strong asset-liability management framework moving forward and continuing with the same risk profile in their respective portfolios,” Rashkes adds.
Although long-term strategies stay intact, many insurers are fine-tuning their asset-liability management (ALM) capabilities to boost flexibility and protect against rising risks.
“Investors are shifting portfolios away from trade-sensitive equities toward high-quality bonds and private credit to improve volatility management and capital preservation,” says Joshua Mangoubi, chief investment officer at Considerate Capital Wealth Management in Chicago.
“Insurers responded to tariff-induced inflation by initially decreasing their duration when rates initially rose, but later increased duration to take advantage of higher yields,” he adds.
Outsourcing Investment Management
According to a NAIC report published in 2025, the number of U.S. insurers that outsourced investment management duties increased by 2.5% in 2024 over 2023.
In addition to outsourcing their investing departments, insurance companies also have consultants to advise on strategies.
One of the largest consulting firms advising insurers is Mercer, part of Marsh McLennan. Mercer works with insurance companies on strategic asset allocation, liability-driven investing, risk management and portfolio construction.
Navigating a New Era of Volatility
The aim of investment consultants like Mercer is to help insurance industry clients, as well as others in the financial services industry, adapt to changes in the markets, as well as in the broader global economy.
Those goals are applicable to the current tariff-driven market and economic environment.
Investing for the Long Term
“Strategic asset allocation for insurers is typically designed with long-term objectives in mind and is meant to withstand exogenous shocks, including market volatility driven by trade tensions,” says Eryn Bacewich, head of insurance solutions at Mercer.
She says Mercer is encouraging clients to stick to their long-term investment plans, but also to take advantage of new opportunities when they have extra cash available.
“However, if rising tariffs or global trade frictions are expected to materially impact an insurer’s operating business, such as through claims inflation or reduced premium income, this could necessitate a review of their strategic asset allocation to ensure appropriate risk alignment,” she adds.
While many insurers continue to prioritize long-term discipline, both consultants and asset managers are also seeing shifts in the building blocks of insurer portfolios.
“Portfolios now increasingly include private and alternative assets as core components,” Mangoubi says. “Insurers utilize private credit and infrastructure debt, among other non-liquid assets, to increase investment returns and spread risk across different asset types.”
This growing use of private market investments, such as private equity, reflects insurers’ search for higher yields and more diversified sources of return.
That’s increasingly been the case as public markets have become increasingly volatile amid trade uncertainty.
Staying Liquid
Managing liquidity remains a top priority.
“Risk management involves insurers keeping substantial liquidity reserves and directing more investments towards high-quality short-term securities like U.S. Treasurys,” Mangoubi notes.
This balance ensures that insurers can fulfill their financial obligations, even if economic conditions worsen or claims-related expenses rise due to inflationary pressures.
Bacewich also points out that rising claims costs, such as higher replacement costs in property and casualty insurance lines, could put greater liquidity demands on insurer portfolios.
To manage this new environment, many insurers are embracing a more agile approach to portfolio construction.
Lifting a Barbell
“Investors have developed a more agile ALM strategy based on a barbell approach,” Mangoubi explains.
He adds that insurers can maintain resilience during times of market uncertainty by using long-term revenue-producing assets with short-term securities.
This is called the barbell approach; it allows insurers to continue pursuing long-term investment goals while keeping enough liquidity on hand to respond quickly to unexpected market or operational shocks.
To get an idea of how that works, imagine a barbell with weights at either end. In this case, the weights are fixed-income asset classes.
The barbell investing strategy involves purchasing long- and short-duration bonds. That way, an investor can benefit from current interest rates and short-term bonds’ lower degree of rate sensitivity, while also taking advantage of the higher yields generated by longer bonds.
Long-Term Opportunities
While insurers are focusing on balancing risk and liquidity through strategies such as accessing private markets or using the barbell approach, volatility itself is creating potential opportunities.
In fact, regardless of what is driving the volatility, investors who are prepared to identify openings in the market can often put to use the familiar advice “buy low, sell high” by nabbing assets at bargain prices.
“Volatility driven by tariff-related uncertainty may present opportunities,” Bacevich says.
“For example, equity market dislocations or widening credit spreads can create attractive entry points for long-term investors,” she adds. “Well-capitalized insurers may be in a strong position to exploit such opportunities while maintaining liability-matching discipline.”
Editor Norah Layne contributed to this article.