Insurers globally are gearing up to ramp up their allocations in private markets, clean energy infrastructure, and advanced technology, according to BlackRock’s 13th annual Global Insurance Report.
The survey found that 91% of insurers plan to increase their investments in private assets over the next two years, a trend that is even stronger in North America and Asia-Pacific where the figure rises to 96%. The report gathered insights from 410 insurance investors across 32 markets.
“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,” said Mark Erickson, global head of BlackRock’s financial institutions group.
With 2024 being a significant election year, insurers are acutely aware of the potential impact of geopolitical tensions and regulatory changes. According to BlackRock’s survey, 68% of insurers identified regulatory developments as a key risk, with 61% also highlighting geopolitical fragmentation.
Other risks such as interest rate volatility (69%) and liquidity challenges (52%) were also at the forefront of insurers’ concerns. Despite the risks, 74% of respondents plan to maintain their current risk profiles. Meanwhile, for 40% of respondents, having an investment partner that understands both the unique needs of their business and operating environment is critical to meeting long-term goals.
Notably, on the public markets side, 42% of participants plan to increase their exposure to government and agency bonds, while 33% are focusing on inflation-linked bonds as inflation remains a pressing issue for 46% of respondents.
The survey also revealed that insurers are looking to diversify within private markets, with 41% targeting opportunistic private debt, 40% looking at private placements, and 39% considering direct lending. Infrastructure debt is also a growing area of interest, with 34% planning to allocate more to this segment.
Over half of insurers (52%) plan to increase allocations to multi-alternative investments, seeking flexibility and bespoke solutions within their portfolios.
“Insurers face unique challenges when evaluating strategic asset allocation to alternative investments, including regulatory issues, liquidity needs, and higher capital charges,” said Olivier Van Eyseren, BlackRock’s head of the financial institutions group in EMEA.
“An important part of our work with insurance clients is helping them navigate these short-term complexities while working toward the best possible long-term portfolio outcomes.”
Meanwhile, 99% of insurers are setting low-carbon transition objectives within their portfolios. Clean energy infrastructure, particularly in wind and solar energy, is a major target, with 60% of insurers planning to invest in these areas. Additionally, emerging technologies like batteries and energy storage are gaining traction.
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