According to Mercer Wyman and Oliver Wyman, nearly three-quarters (73%) of insurance companies currently invest in private markets or plan to invest in private markets in 2024, but 10 Nearly four in 10 companies (39%) say they aim to increase their allocation to private markets. Marsh McLennan recently published the Global Insurance Survey.
The study includes insights from more than 80 insurers around the world and highlights insurers’ investment and portfolio positioning plans for 2024 and beyond.
A notable statistic to highlight is that 32% of insurers intend to increase their asset allocation to private debt this year, up from 27% in 2023.
However, it must be noted that the cost and complexity of both investment products and manager selection are the most “pervasive headwinds” to increasing allocations to already invested investors.
Amit Popat, global head of financial institutions at Mercer, commented: “Increased interest rate and bond volatility, as well as considerable uncertainty around inflation, are causing many insurers to re-evaluate their investment frameworks and consider ways to utilize excess cash. There is a focus on allocations to private debt strategies as some look to benefit from the income enhancement, diversification and structural protection afforded by the asset class.”
Looking ahead, Mercer and Oliver Wyman found that market volatility (61%) was cited as the number one challenge to insurers’ investment frameworks over the next 12 months, prompting many companies to reevaluate their fixed income strategies. He also emphasized that he is encouraging them to do so.
60% of insurers cite optimizing their core fixed income portfolio as their biggest investment opportunity over the coming year, closely followed by diversifying their portfolio away from traditional asset classes (51%) and increasing revenue. (37%) continue to use illiquidity as a driving force.
However, measures taken to increase cash allocation in 2023 are expected to be reversed this year, with only 7% of insurers planning to increase cash in 2024 and 27% reducing exposure. It is expected to be.
Further to this, 49% of insurers report having excess liquidity in their portfolios.
At the same time, meeting evolving regulatory requirements appears to be the top operational challenge for insurers (61%) in 2024, while data management remains another key concern.
Insurers also believe that accounting and regulatory violations (39%) are the biggest challenge to implementing investment decisions across their portfolios.
said Joshua Zwick, head of Oliver Wyman’s wealth management practice. It’s about responding to and taking advantage of evolving market risks and opportunities. ”
Another important factor to highlight is that a significant proportion of UK (100%), European (80%) and Asian (75%) insurers compared to their US peers (41%) and incorporating sustainability considerations into the investment process. (down from 71% a year ago), and Canada (42%).
Additionally, more than two-thirds (68%) of global insurers are incorporating sustainable investing factors into their investment decisions, down from the 83% reported last year. Masu.
While a combination of stakeholder preferences and regulatory/political expectations have been cited as the main reasons why insurers choose to incorporate sustainability factors into their investment decisions, risk reduction is also a prominent factor behind adoption. It’s the driving force.
