Insurers Boost Private Market Allocations, Embracing Clean Energy

Insurers Boost Private Market Allocations, Embracing Clean Energy

Global insurers are increasingly focusing on boosting their allocations to private markets, clean energy infrastructure, and innovative technologies in the coming year. According to BlackRock's 13th annual Global Insurance Report, a compelling majority of respondents—91%—indicate plans to invest more in private equity within the next two years. This percentage rises to 96% among insurers in both the Asia-Pacific and North American regions. The report captures insights from 410 insurance investors across 32 markets, representing nearly $27 trillion in assets under management.

Navigating Risks in an Uncertain Environment

Mark Erickson, the Global Head of BlackRock's Financial Institutions Group, emphasizes the accelerated demand for private market investments among insurers. These investments are seen as pivotal due to their dual advantages: diversification and enhanced income generation. With 2024 being a notable year for political events, insurers express concerns over macro risks stemming from regulatory developments, highlighted by 68% of respondents, as well as rising geopolitical tensions at 61%. Interest rate risks are acknowledged by 69%, while liquidity concerns are noted by 52% of insurers. However, 74% maintain their current risk profiles.

Strategic Partnerships

Many insurers also recognize the value of partnerships to bolster their internal expertise in risk evaluation and portfolio management. Forty percent of those surveyed believe that having an investment partner who comprehends both the insurance sector and its operational challenges is crucial for achieving their strategic objectives.

Balanced Asset Allocation Across Markets

Within the public markets, 42% of participants plan to ramp up their investments in government and agency bonds. Inflation-linked bonds are also gaining traction, with 33% intending to enhance their positions, considering that 46% identify inflation as a prominent macro risk. Furthermore, 44% aim to elevate their investments in cash and short-term instruments to ensure liquidity.

Investments in Private Debt

In the realm of private markets, insurers show a propensity to enhance their allocations to private debt, with 41% interested in opportunistic private debt, 40% in private placements, and 39% in direct lending. BlackRock's report highlights the expanding scope of private debt as it encompasses a broad range of lending opportunities that align with the insurance investment goals of securing long-term assets to support long-term liabilities, while also increasing investment income through illiquidity. Over half of the insurers surveyed—52%—express plans to boost allocations to multi-alternative investments for improved flexibility and customization.

Clean Energy Infrastructure and Low-Carbon Objectives

As the urgency for sustainable investments grows, nearly all—99%—of the insurers have established low-carbon transition goals within their portfolios. Among them, 57% cite the management and mitigation of climate risks as primary motivators. Insurers are also responding to stakeholder interests and regulatory demands, identifying clean energy infrastructure as a key focus area, with 60% aiming to invest in wind and solar technologies, and 60% in batteries and energy storage. Remarkably, 66% of surveyed individuals highlight a stronger conviction towards investing in low-carbon transitions now compared to the previous year.

Technological Advancements in Insurance Investment

In light of today's volatile and intricate macroeconomic environment, insurers are increasingly prioritizing technology investments. They recognize the need for integrated asset allocation (63%) and asset liability management (61%) as critical dimensions of their technology strategies. Furthermore, 51% note regulatory capital integration as an area where technology could greatly enhance value. As insurers continue their movement into private markets, 53% see private asset modeling as another domain ripe for technological leverage.

About the BlackRock Global Insurance Survey

This comprehensive survey, now in its thirteenth iteration, provides valuable insights into the strategic thoughts and plans of the global insurance sector. By conducting structured interviews with senior insurance executives, the survey offers a well-rounded perspective of market trends. This year’s survey, carried out in mid-2024, reflects the opinions of 410 senior executives across 32 markets, including diverse regional representation: 42% from EMEA, 29% from Asia-Pacific, 19% from North America, and 10% from Latin America. Collectively, these entities control investable assets of roughly $27 trillion, underscoring the significant implications of this report.

About BlackRock

BlackRock is dedicated to enhancing financial well-being for individuals worldwide. As a fiduciary for investors and a distinct leader in financial technology, BlackRock plays a critical role in helping millions build savings that will sustain them throughout various life stages. For additional insights into their services and initiatives, you can explore their main website.

Frequently Asked Questions

What is the main focus of BlackRock's 2024 report?

The primary focus is on insurers' increasing allocations to private investments and clean energy infrastructure.

How many insurers participated in the BlackRock survey?

410 insurance investors across 32 markets participated in the survey.

What percentage of insurers plan to invest more in private markets?

91% of all responders plan to increase investments in private markets over the next two years.

Which technologies are insurers focusing on according to the survey?

Insurers are focusing on integrated asset allocation and asset liability management as key technology priorities.

What motivates insurers to prioritize low-carbon investments?

Insurers cite climate risk management and regulatory compliance as key motivations for low-carbon investments.

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