Insurance executives overseeing a collective $29 trillion in assets say they plan to increase their exposure to private markets, bumping up their allocations to direct lending while cutting back on real estate and private equity, according to a new survey of the industry by BlackRock.
Of the 378 senior-level respondents to BlackRock's 12th annual Global Insurance Report published Sept. 27, 60% said they planned to readjust their strategic asset allocation to focus on flexibility and new investment opportunities. Increasing their allocation to private markets was the top priority for 89% of insurers, with 60% planning to focus those allocations on direct lending.
More than one-third of respondents said they planned to cut back on allocations to real estate debt, real estate equity and private equity.
"This year's Global Insurance Report comes in the second post-COVID year, amid five structural mega forces affecting the macro outlook: the aging population; the transition to a low-carbon economy; global fragmentation; the changing roles of banks and non-bank financial institutions; and digital disruption," said Charles Hatami, managing director and global head of BlackRock's financial and strategic investors group, in a news release. "These factors, coupled with upcoming changes to insurance regulations and accounting regimes, create new challenges and opportunities for chief investment officers and other investors."
The results of BlackRock's survey are broadly in line with similar research put out by firms such as Goldman Sachs Asset Management and abrdn earlier this year, both of which found an increased interest in private markets among insurers.
Insurers' interest in public fixed income remains strong, with 92% of respondents planning to maintain or increase their allocations. Clean-energy infrastructure was another popular area for reallocation, with 62% of respondents planning to up their investments in the sector.
The reshuffling comes amid insurers' macroeconomic concerns, which are mirrored across the wider financial industry. More than half of global insurers reported believing that the banking sector was likely to experience further cracks — a concern that was much higher among North American respondents (77%). Among insurers in the Asia-Pacific region, 55% reported being concerned about residential real estate.
The survey was conducted in June and July.