Where do insurers invest? | Insurance business America
The global survey includes insights from over 80 insurers
Insurance News
By Terry Gangcuangco
Marsh McLennan firms Mercer and Oliver Wyman have released their 2024 Global Insurance Survey, shedding light on the future investment and portfolio management strategies of over 80 insurance companies. A key finding from the survey is the increasing focus on private market investments, particularly private debt, as a core component of insurers’ portfolios.
The report highlights a clear trend toward private market investment among insurers, with nearly 73% either already investing in private markets this year or planning to participate. Additionally, 39% of global respondents want to increase their investment in private markets.
In particular, there has been a significant increase in interest in private debt: 32% of insurers want to increase their investments in this area, compared to 27% last year. Despite the enthusiasm, the main obstacles to increasing allocations are the high costs and complexity associated with investment decisions and manager selection for those already in the market.
“Allocations to private debt strategies are a focus for a significant portion of insurers as they seek access to the higher returns, diversification and structural protection benefits of this asset class.”
For those insurers who are not yet investing in private markets, the challenges lie primarily in liquidity bottlenecks, limited resources for evaluating investment opportunities and the complexity of investment instruments.
Another critical obstacle cited in the survey is market volatility, which 61% of insurers see as a major concern for their investment strategies over the next year. This has led many to rethink their approach to fixed income investing, with 60% seeing optimization of their core fixed income portfolios as a prime opportunity.
The survey also shows a shift away from cash allocation in 2024: only 7% of insurers plan to increase their cash holdings, while 27% aim to reduce them. This adjustment comes in a year in which 49% of insurers report having excess liquidity in their portfolios.
Operationally, managing evolving regulatory requirements, along with data management concerns, proved to be a major challenge for 61% of insurers in 2024. The impact of accounting and regulatory pressures on investment decisions was also cited as a major concern by 39% of insurers.
Joshua Zwick, head of Oliver Wyman’s wealth management practice, commented on the industry’s adaptability, saying: “Last year’s market experience, which was not quite as many expected, has reinforced the need for insurers to maintain a sound structure.” core competency while maintaining the flexibility to respond to and capitalize on evolving market risks and opportunities.”
The survey also examined the adoption of sustainable investment strategies and found significant geographical differences. Insurers in the UK, Europe and Asia are more closely integrating sustainability factors into their investment processes compared to their counterparts in the US and Canada.
Despite a global trend to integrate sustainable investment criteria into decision-making, there has been a decline in this practice compared to last year. Risk mitigation and compliance with stakeholder preferences and regulatory/policy expectations remain important drivers for the adoption of sustainable investment practices.
What do you think about this story? Share your thoughts in the comments below.
similar posts
Stay up to date with the latest news and events
Join our mailing list, it’s free!
Source link
2024-04-11 04:00:00
www.insurancebusinessmag.com
