Investment consultancy Frontier Advisors says it is time for general insurers in Australia to consider a change in strategy, by stepping up their focus in other asset classes such as unlisted infrastructure to improve investment returns.

Principal Consultant Elie Saikaly says examples of unlisted infrastructure include airports, toll roads, healthcare assets and renewables.

“The general insurance industry has experienced a challenging two years,” Mr Saikaly told insuranceNEWS.com.au.

“Even though insurers have several levers to improve margins and return on equity outcomes, we believe now is the time for one specific lever to come into greater focus, investment profit.”

He says there is scope for insurers to improve investment results further, based on the findings of an asset allocation modelling done by Frontier Advisors.

The modelling shows better investment income is possible if insurers shift more towards other asset classes such as unlisted infrastructure that offer “positive real returns into the future”.

According to him, unlisted infrastructure is relatively more capital efficient than equities and although considered illiquid, it is expected to generate similar return outcomes.

“Unlisted infrastructure typically provide steady streams of income, are more capital efficient than equities and expected returns are quite good in a post-COVID world,” Mr Saikaly said.

He says Frontier has been advising insurers to diversify their portfolios away from long duration bonds into other asset classes that present capital-efficient opportunities.

The business recently launched an insurance investment platform for insurer clients who are keen to achieve capital returns.

Portfolio Analytics enables real-time testing of both strategic and dynamic investment ideas, meaning insurers can shift exposures between specific market premia such as credit, liquidity or equity risk.