Insurers buy into alternative assets amidst pandemic

New research from financial services firm State Street Corporation revealed that the COVID-19 crisis has fuelled the appetite of insurers for alternative asset classes - particularly private credit and private equity.

In the short term, 33% and 28% of insurers said they plan to increase their allocation to private credit and private equity respectively. On the other hand, 10% of them expect to decrease their allocation to private credit and 13% to private equity.

Commenting on the findings, State Street global head of alternative investment solutions Paul Fleming said, “With traditional fixed income strategies generating lower returns, we are observing insurance companies increase allocations into this asset class at an accelerated pace.

“We are seeing an uptick in insurance firms coming to us for our alternative asset servicing capabilities … We believe the current COVID-19 crisis will further intensify the move towards alternatives.” For the research, State Street surveyed insurers around the world on the impact of the COVID-19 pandemic and their views on how asset managers have handled the crisis.

Insurers have faced a variety of investment challenges during the crisis and the survey found respondents having faced difficulties around security valuations (39%); liquidity challenges (36%); and cash forecasting (25%). However, it was also revealed that 78% of insurers are confident their asset managers can navigate the current financial crisis caused by COVID-19.

“The COVID-19 crisis has created a number of challenges for asset owners and managers, but our research shows insurers appear to be coping well when it comes to their investment operations,” said State Street global head of the asset manager segment John Lehner.

Source: Asia Insurance Review

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