Global insurers report growing interest in alternative investments
In a low-yield environment, 74 percent of global insurers struggle to find a balance between alpha generation and the cost of capital. Since bond yields do not sufficiently cover liability liabilities, 66 percent of insurers believe that it is essential to invest in alternative solutions such as private debt and real assets in order to diversify portfolio risk.
This is according to Natixis Investment Managers’ global survey of 200 chief investment officers (CIOs) and members of investment teams operating for life insurance, property and casualty insurance companies (fire, accidents and risks various) and reinsurance.
The survey also found that barriers remain to entry: 97 percent of respondents say that regulation prevents them de facto from investing in illiquid, riskier assets, and 72 percent of respondents outsource the management of their portfolios. Among them, insurance investors decide to outsource almost half (48 percent) of their portfolios.
Despite insurers' growing appetite for alternative investments, almost all (89 percent) of the investment teams surveyed said that regulation is a drag on investing in these asset classes. Regulatory capital requirements, in particular, inevitably drive portfolios towards low-yielding fixed income securities.
This percentage rose sharply compared to the 2015 edition of the Natixis Investment Managers survey, when the European Solvency II Directive was not yet in force. At that time, only about half of insurers had said that regulation and capital requirements were holding back any attempt to invest in new and alternative asset classes.
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