Virtually three-quarters (73 per cent) of insurers at present put money into personal markets or plan to take action in 2024, in accordance with the Mercer-Oliver Wyman World Insurance coverage Survey.
The skilled providers companies’ newest survey additionally discovered that almost 4 in 10 (39 per cent) intend to extend their personal markets allocations, whereas a 3rd (32 per cent) of insurers intend to extend asset allocations to non-public debt this yr, up from 27 per cent in 2023.
Nevertheless, the fee and complexity of each funding devices and supervisor choice stay probably the most prevalent headwinds to growing allocations amongst these already invested.
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Market volatility was probably the most cited problem (61 per cent) to insurers’ funding frameworks over the subsequent 12 months, prompting many to re-evaluate their fastened revenue methods.
Optimisation of core fastened revenue portfolios was cited as the highest funding alternative for the yr forward by 60 per cent of insurers, adopted by diversifying portfolios away from conventional asset courses (51 per cent) and utilising illiquidity as a driver of returns (37 per cent).
Steps taken to extend money allocations in 2023 are set to tug again this yr. Simply 7 per cent of insurers plan to extend money in 2024, whereas 27 per cent plan to scale back publicity. Practically half (49 per cent) of insurers report extra liquidity of their portfolios.
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“With elevated rates of interest and glued revenue volatility, in addition to appreciable uncertainty round inflation, many insurers are re-evaluating their funding frameworks and assessing methods to place extra money to work,” stated Mercer’s world head of monetary establishments Amit Popat.
“Allocations to non-public debt methods are in focus for a big proportion of insurers as they search entry to the improved revenue, diversification, and structural safety advantages afforded by the asset class”,
For insurers with no present personal market allocations, probably the most cited hurdles embody liquidity constraints, an absence of assets to evaluate funding alternatives, and the complexity of funding devices.
Mercer and Oliver Wyman are companies of Marsh McLennan group of corporations.
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