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Insurers pivot to private markets

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By Charbel Kadib
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3 minute read

Global insurers are increasing exposure to private markets as they seek greater flexibility in an uncertain macroeconomic environment, according to a new analysis from BlackRock.

Investment management giant BlackRock’s latest Global Insurers Report has identified a growing appetite for private markets exposure among insurers.

The report, which involved a survey of 378 insurance investors around the world, revealed 89 per cent of insurers increased allocations to private markets, with a particular preference for direct lending (60 per cent).

Meanwhile, over one-third of respondents said they plan to reduce allocations to real estate debt, real estate equity, and private equity.

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However, an overwhelming majority of insurers said public fixed income would remain a key part of their strategic asset allocations, with 92 per cent planning to maintain or increase their exposure.

According to BlackRock, this shift is underpinned by demand for greater flexibility in an increasingly uncertain macroeconomic environment.

Elevated inflation remains the main concern for 71 per cent of respondents, followed by recession risks (59 per cent), and instability in the banking system (55 per cent).

When divided by region, 77 per cent of insurers in North America noted concern over the financial system, while 55 per cent of APAC respondents flagged risks in the residential property market.

When assessing future investments, five key “mega forces” influence asset allocation decision making — the ageing population, the transition to a low-carbon economy, global fragmentation, the changing roles of banks and non-bank financial institutions, and digital disruption.

“These factors, coupled with upcoming changes to insurance regulations and accounting regimes, create new challenges and opportunities for chief investment officers and other investors,” Charles Hatami, global head of BlackRock’s financial and strategic investors group, said.

The BlackRock report revealed 62 per cent of respondents expect the transition to clean energy infrastructure to generate promising investment opportunities with North American insurers most likely to favour this thematic (74 per cent), followed by Europe, the Middle East, and Africa (62 per cent), APAC (57 per cent), and Latin America (56 per cent).

The tech sector is also considered to present good investment opportunities, with 47 per cent of global insurers expecting the growing appetite for risk management solutions to drive tech investment over the next two years.

Moreover, 47 per cent of insurers said they are considering investments in technology designed to increase operational efficiency and reduce cost.

Other incentives for tech investment include integration of climate risk (38 per cent) and regulatory compliance solutions (45 per cent).

Insurers said technology can add value to strategic asset allocation via workflow automation (45 per cent), liability integration (42 per cent), and modelling of alternative strategic asset allocations (35 per cent).

“With the regulatory and accounting regime transitions across the region, more insurers are seeking investment approach that is optimised not only from an economic perspective, but also with accounting and regulatory capital considerations in mind,” Kimberly Kim, head of BlackRock’s financial institutions group for APAC, said.

“The importance of investing in technology to navigate regulatory change and growing exposures to private markets is also front and centre of APAC insurers’ minds.”

Insurers pivot to private markets

Global insurers are increasing exposure to private markets as they seek greater flexibility in an uncertain macroeconomic environment, according to a new analysis from BlackRock.

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