Where will insurance companies invest this year?

Marsh McLennan’s Mercer Wyman and Oliver Wyman have released the 2024 Global Insurance Survey, highlighting the future investment and portfolio management strategies of more than 80 insurance companies. A key takeaway from this study is the growing focus on private market investments, and in particular private bonds, as a core element of insurers’ portfolios.

The report highlights a strong trend among insurers to invest in private markets, with nearly 73% currently in private markets or planning to enter private markets this year. Furthermore, his 39% of global respondents want to expand their investments in private markets.

Specifically, there has been a notable rise in interest in private debt, with 32% of insurers looking to increase investment in this area, up from 27% a year ago. Despite the enthusiasm, the main barriers to increasing allocations include the high costs and complexity associated with investment selection and manager selection for investments already in the market.

“A significant proportion of insurance companies are focused on allocations to private debt strategies as they seek to benefit from the income enhancement, diversification and structural protection offered by the asset class.”

For insurance companies that have not yet invested in the private market, the challenges primarily relate to liquidity constraints, limited resources to evaluate investment opportunities, and the complexity of investment products.

Another significant hurdle cited in the survey was market volatility, with 61% of insurers citing it as a key concern in their investment strategy over the coming year. This is causing many companies to rethink their approach to fixed income investing, with 60% looking at optimizing their core fixed income portfolio as the biggest opportunity.

The survey also highlights a shift away from cash allocations in 2024, with only 7% of insurers planning to increase cash holdings and 27% looking to reduce cash holdings. are in contrast. This adjustment came in a year in which 49% of insurers reported having excess liquidity in their portfolios.

On the operational side, addressing evolving regulatory requirements emerged as a key challenge for 61% of insurers in 2024, alongside data management concerns. 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 Asset Management at Oliver Wyman, reflected on the industry’s ability to adapt. At the same time, we remain agile to respond to and exploit evolving market risks and opportunities. ”

The study also examined the adoption of sustainable investment strategies and noted significant geographic disparities. Insurers in the UK, Europe and Asia are incorporating more sustainability factors into their investment processes compared to their US and Canadian counterparts.

Despite the global trend to incorporate sustainable investment criteria into decision-making, this practice has decreased compared to previous years. Risk mitigation and compliance with stakeholder preferences and regulatory/political expectations remain key drivers for adopting sustainable investment practices.

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