Global insurers are focused on increasing their allocations to private markets, investing in clean energy infrastructure and utilizing innovative technology, a new report finds.
According to BlackRock’s 13th annual Global Insurance Report, 91% of survey respondents intend to increase investments in private assets over the next two years, particularly across multiple private debt categories, including opportunistic private debt (41%), private placements (40%), and direct lending (39%).
The report, based on a survey conducted in July to September 2024, encapsulates the views of 410 senior industry executives in 32 markets with the following regional distribution: 42% from EMEA, 29% from Asia-Pacific, 19% from North America, and 10% from Latin America. Taken together, these companies represent investable assets of approximately US$27 trillion.
“We’ve seen rapidly accelerated demand for private markets among insurers in recent years, given these investments’ dual benefits of diversification and increased income generation,” remarks Mark Erickson, global head of BlackRock’s financial institutions group.
As the scope of private debt has expanded to encompass a wider array of lending opportunities, BlackRock’s report indicates this asset class can support insurance investment objectives for those needing long-term assets to support long-term liabilities, as well as increasing investment income through illiquidity rather than other investment characteristics.
In addition, over half of insurers (52%) reported they will increase allocations to multi-alternative investments for greater flexibility and customization.
Within public markets, 42% of respondents plan to increase allocations to government and agency bonds. Inflation-linked bonds are also a priority, with 33% planning to increase exposure, given nearly half of insurers (46%) identify inflation as a major macro risk. Additionally, 44% of respondents are looking to increase their allocations to cash and short-term instruments for liquidity.
Clean energy infrastructure
Nearly all (99%) of insurers surveyed have set a low-carbon transition objective within their investment portfolio, with 57% of respondents citing management and/or mitigation of climate risks as a top motivation for doing so.
Additional drivers for setting low-carbon transition objectives include responding to stakeholder and beneficiary interest and fulfilling regulatory requirements.
To support their low-carbon transition strategy, clean energy infrastructure such as wind and solar (60%) and technologies such as batteries and energy storage (60%) were identified as the top two thematic areas that insurers plan to target.
In addition, 66% of respondents stated that they have more conviction now towards investing in the low-carbon transition than they did one year ago.
Innovative technology
In an increasingly volatile and complex macroeconomic and regulatory environment, insurers recognize the importance of investing in technology. Integrated asset allocation (63%) and asset liability management (61%) were named as strategic priorities for their technology platforms.
Regulatory capital integration (51%) was also cited as an area where technology could add value. As insurers look to continue their deployment into private markets, 53% of respondents view private asset modeling as an additional area to leverage technology.
With 2024 being a big election year, insurers see political uncertainty impacting macro risks, citing regulatory developments (68%) and rising geopolitical tension and fragmentation (61%) as their top concerns.
Respondents also see interest rate risk (69%) and liquidity risk (52%) as the most serious market risks. Despite this outlook, 74% of insurers have no plans to change their current risk profiles.
Many insurers said they benefit from partnerships to augment their internal expertise for risk evaluation as well as portfolio construction. According to 40% of respondents, an investment partner who understands both their insurance business and its operating model is fundamental to the success of their strategic priorities.
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