Conning, an investment management firm specializing in insurance and institutional investors, has released a new perspective examining how property and casualty (P&C) insurers can adjust their portfolios as underwriting conditions become more competitive and the benefits of rising interest rates begin to wane.
In the next differentiator: investment strategies in the evolving property and casualty insurance market, Matt Reilly, managing director and head of insurance solutions at Conning, said investment strategies could play a greater role in differentiating insurers’ performance as market conditions change.
Conning’s analysis shows that entering 2026, the U.S. property and casualty insurance industry has strong financial strength after experiencing a period of strong underwriting performance, continued premium growth and high investment returns.
However, the company noted that pricing momentum has slowed across multiple business areas, premium growth is moderating and reserve concerns remain in some casualty lines, creating a more challenging operating environment.
The Corning report indicates that while insurers continue to benefit from higher portfolio yields, the pace of improvement has slowed as market rates have become more range-bound. As a result, the firm believes that future investment performance may increasingly depend on decisions related to asset allocation, sector selection and portfolio construction, rather than solely on broader market conditions.
“As market conditions evolve, investment strategy may become an increasingly important differentiator among insurers,” Reilly added. “Insurers today have access to a wider range of investment opportunities, creating new ways to improve portfolio income, diversification and capital efficiency.”
Based on its analysis of insurance company portfolios, Corning identified some changes in portfolio positioning across the industry. Insurers have increased allocations to cash and short-term investments in recent years while gradually reducing exposure to lower-rated credit as high-quality fixed-income securities have become more attractive in a high-rate environment, the company reported.
The report also highlights the continued growth in exposure to alternative investments and private markets. Conning said allocations to Schedule BA assets have increased over the past decade, reflecting insurers seeking additional diversification and alternative sources of return outside of traditional public markets.
Structured securities are another area of increasing interest. Corning’s analysis shows that structured securities now make up a much larger share of insurers’ bond portfolios than they did a decade ago, with allocations to mortgage-backed securities and asset-backed securities also rising. Insurers are also expanding investments in collateralized loan obligations (CLOs) and other specialty areas backed by a variety of underlying assets, the company noted.
Private placement continues to be favored by insurance companies of all sizes, the report said. Conning said adoption is growing among both large and small insurers as they seek differentiated revenue streams and diversification within their fixed income portfolios.
The report focuses specifically on CLOs, which Corning describes as an increasingly important component of insurance companies’ investment strategies. The firm’s research shows that more than half of insurance companies with more than $100 million in invested assets hold CLO exposure, with the majority of allocations concentrated in higher-rated tranches. Corning said this reflects a generally conservative approach to the asset class while allowing insurers to capture additional revenue opportunities.
In addition to traditional alternatives, Corning highlighted growing interest in private credit and asset-based financing strategies. The company noted that insurers are increasingly exploring income-focused investments and insurance-oriented structures aimed at improving capital efficiency and expanding access to private market opportunities.
Reilly said the investment universe of insurers has expanded significantly in recent years through the development of new structures, private market solutions and insurance-focused investment vehicles. Corning believes these developments make a broader range of strategies available to insurers of all sizes, not just the largest ones.
The report concludes that as investment opportunities become more widespread, competitive advantage may rely less on access to investment products and more on how effectively insurers implement strategies, manage governance processes and integrate investments into broader portfolio objectives.
Corning believes the insurance companies best suited for future market conditions will be those that can balance risk, liquidity, capital efficiency and return objectives within a rigorous investment framework.
