The place are insurers investing? | Insurance coverage Enterprise America

Marsh McLennan companies Mercer and Oliver Wyman have printed their 2024 International Insurance coverage Survey, which sheds mild on the funding and portfolio administration methods of over 80 insurance coverage corporations transferring ahead. A key takeaway from the survey is the growing concentrate on non-public market investments, significantly non-public debt, as a core part of insurers’ portfolios.

The report underscores a big inclination in the direction of non-public market investments amongst insurers, with practically 73% both presently engaged or planning to enterprise into non-public markets this yr. Moreover, 39% of the worldwide respondents want to enhance their investments in non-public markets.

Particularly, there’s a notable uptick in curiosity in non-public debt, with 32% of insurers aiming to reinforce their investments on this space, up from 27% within the earlier yr. Regardless of the keenness, the first limitations to growing allocations embrace the excessive prices and complexities related to funding decisions and supervisor choice for these already out there.

“Allocations to personal debt methods are in focus for a big proportion of insurers as they search entry to the improved earnings, diversification, and structural safety advantages afforded by the asset class.”

For these insurers but to put money into non-public markets, the challenges are predominantly round liquidity constraints, restricted assets for evaluating funding alternatives, and the intricacy of funding devices.

One other vital impediment cited by the survey is market volatility, recognized by 61% of insurers as a significant concern for his or her funding methods over the following yr. This has led many to rethink their approaches to fastened earnings investments, with 60% eyeing optimization of their core fastened earnings portfolios as a main alternative.

The survey additionally highlights a shift away from money allocations in 2024, with solely 7% of insurers planning to extend their money holdings, contrasting with 27% seeking to lower them. This adjustment is available in a yr the place 49% of insurers report having surplus liquidity of their portfolios.

On the operational entrance, navigating evolving regulatory necessities emerged as a big problem for 61% of insurers in 2024, alongside considerations about knowledge administration. The impression of accounting and regulatory pressures on funding selections was additionally flagged as a significant concern by 39% of insurers.

Joshua Zwick, head of Oliver Wyman’s asset administration follow, mirrored on the trade’s adaptability, stating: “The market expertise of the previous yr, which did not pan out precisely as many had anticipated, has strengthened the necessity for insurers to take care of a strong core whereas additionally sustaining agility to answer and capitalize on evolving market dangers and alternatives.”

The survey additionally explored the adoption of sustainable funding methods, noting appreciable geographical disparities. Insurers within the UK, Europe, and Asia present greater incorporation of sustainability components into their funding processes in comparison with their counterparts within the US and Canada.

Regardless of a worldwide development in the direction of integrating sustainable funding standards into decision-making, there was a decline on this follow in comparison with the earlier yr. Danger mitigation and compliance with stakeholder preferences and regulatory/political expectations stay important drivers for adopting sustainable funding practices.

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