Insurers eye elevated investments in non-public markets and clear power

Insurers globally are gearing as much as ramp up their allocations in non-public markets, clear power infrastructure, and superior know-how, in accordance with BlackRock’s thirteenth annual International Insurance coverage Report.

The survey discovered that 91% of insurers plan to extend their investments in non-public belongings over the following two years, a development that’s even stronger in North America and Asia-Pacific the place the determine rises to 96%. The report gathered insights from 410 insurance coverage buyers throughout 32 markets.

“We’ve seen quickly accelerated demand for personal markets amongst insurers lately, given these investments’ twin advantages of diversification and elevated revenue era,” mentioned Mark Erickson, world head of BlackRock’s monetary establishments group.

With 2024 being a big election yr, insurers are aware of the potential impression of geopolitical tensions and regulatory modifications. In line with BlackRock’s survey, 68% of insurers recognized regulatory developments as a key threat, with 61% additionally highlighting geopolitical fragmentation.

Different dangers corresponding to rate of interest volatility (69%) and liquidity challenges (52%) had been additionally on the forefront of insurers’ considerations. Regardless of the dangers, 74% of respondents plan to take care of their present threat profiles. In the meantime, for 40% of respondents, having an funding accomplice that understands each the distinctive wants of their enterprise and working surroundings is vital to assembly long-term objectives.

Notably, on the general public markets facet, 42% of contributors plan to extend their publicity to authorities and company bonds, whereas 33% are specializing in inflation-linked bonds as inflation stays a urgent challenge for 46% of respondents.

The survey additionally revealed that insurers need to diversify inside non-public markets, with 41% focusing on opportunistic non-public debt, 40% non-public placements, and 39% contemplating direct lending. Infrastructure debt can be a rising space of curiosity, with 34% planning to allocate extra to this section.

Over half of insurers (52%) plan to extend allocations to multi-alternative investments, searching for flexibility and bespoke options inside their portfolios.

“Insurers face distinctive challenges when evaluating strategic asset allocation to various investments, together with regulatory points, liquidity wants, and better capital expenses,” mentioned Olivier Van Eyseren, BlackRock’s head of the monetary establishments group in EMEA.

“An vital a part of our work with insurance coverage purchasers helps them navigate these short-term complexities whereas working towards the very best long-term portfolio outcomes.”

In the meantime, 99% of insurers are setting low-carbon transition goals inside their portfolios. Clear power infrastructure, significantly in wind and photo voltaic power, is a serious goal, with 60% of insurers planning to spend money on these areas. Moreover, rising applied sciences like batteries and power storage are gaining traction.

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