Where are insurers investing? | Insurance Business America

Marsh McLennan businesses Mercer and Oliver Wyman have published their 2024 Global Insurance Survey, which sheds light on the investment and portfolio management strategies of over 80 insurance companies moving forward. A key takeaway from the survey is the increasing focus on private market investments, particularly private debt, as a core component of insurers’ portfolios.

The report underscores a significant inclination towards private market investments among insurers, with nearly 73% either currently engaged or planning to venture into private markets this year. Additionally, 39% of the global respondents are looking to boost their investments in private markets.

Specifically, there’s a notable uptick in interest in private debt, with 32% of insurers aiming to augment their investments in this area, up from 27% in the previous year. Despite the enthusiasm, the primary barriers to increasing allocations include the high costs and complexities associated with investment choices and manager selection for those already in the market.

“Allocations to private debt strategies are in focus for a significant proportion of insurers as they seek access to the enhanced income, diversification, and structural protection benefits afforded by the asset class.”

For those insurers yet to invest in private markets, the challenges are predominantly around liquidity constraints, limited resources for evaluating investment opportunities, and the intricacy of investment instruments.

Another critical obstacle cited by the survey is market volatility, identified by 61% of insurers as a major concern for their investment strategies over the next year. This has led many to reconsider their approaches to fixed income investments, with 60% eyeing optimization of their core fixed income portfolios as a prime opportunity.

The survey also highlights a shift away from cash allocations in 2024, with only 7% of insurers planning to increase their cash holdings, contrasting with 27% looking to decrease them. This adjustment comes in a year where 49% of insurers report having surplus liquidity in their portfolios.

On the operational front, navigating evolving regulatory requirements emerged as a significant challenge for 61% of insurers in 2024, alongside concerns about data management. The impact of accounting and regulatory pressures on investment decisions was also flagged as a major concern by 39% of insurers.

Joshua Zwick, head of Oliver Wyman’s asset management practice, reflected on the industry’s adaptability, stating: “The market experience of the past year, which didn’t pan out exactly as many had expected, has reinforced the need for insurers to maintain a solid core while also maintaining agility to respond to and capitalize on evolving market risks and opportunities.”

The survey also explored the adoption of sustainable investment strategies, noting considerable geographical disparities. Insurers in the UK, Europe, and Asia show higher incorporation of sustainability factors into their investment processes compared to their counterparts in the US and Canada.

Despite a global trend towards integrating sustainable investment criteria into decision-making, there has been a decline in this practice compared to the previous year. Risk mitigation and compliance with stakeholder preferences and regulatory/political expectations remain significant drivers for adopting sustainable investment practices.

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