According to BlackRock’s 13th annual Global Insurance Report, insurers worldwide are planning significant increases in their allocations to private markets and clean energy infrastructure, signaling a shift toward long-term growth and sustainability.
The report, which surveyed 410 insurance investors representing nearly $27 trillion in assets, highlights a strong trend: 91% of insurers intend to boost their private asset investments over the next two years. This figure rises to 96% for insurers in North America and the Asia-Pacific region, underlining the growing demand for private markets. These investments are being driven by the need for diversification and enhanced income generation, as insurers seek to navigate the challenges of a rapidly changing global economy.
Private Assets and Strategic Allocations
Mark Erickson, Global Head of BlackRock’s Financial Institutions Group, noted the rapidly increasing demand for private market investments. He emphasized that insurers see these investments as a way to secure diversified income streams, making them an essential part of the portfolio mix.
The report also reveals that insurers are taking a balanced approach to asset allocation. While 42% of respondents are planning to increase allocations to government and agency bonds, private debt is receiving particular attention. Insurers are looking to expand into various categories of private debt, including opportunistic private debt (41%), private placements (40%), direct lending (39%), and infrastructure debt (34%). This diversification reflects a broader desire for illiquid assets that can provide stable returns over the long term.
In public markets, inflation-linked bonds are gaining traction, with 33% of insurers planning to increase exposure due to concerns about inflation, which nearly half of the respondents identified as a major macro risk. Additionally, 44% of insurers are planning to increase investments in cash and short-term instruments to bolster liquidity.
Clean Energy Infrastructure: A Growing Focus
A key highlight of the report is the strong commitment to low-carbon transition objectives, with 99% of insurers setting these goals within their investment portfolios. Among the most sought-after investments are clean energy infrastructure projects, particularly in wind and solar energy (60%) and energy storage technologies (60%). This reflects a broader trend among insurers to align their portfolios with sustainability goals, as they seek to manage and mitigate climate risks while responding to increasing stakeholder demand for environmentally conscious investments.
Olivier Van Eyseren, Head of the Financial Institutions Group for EMEA at BlackRock, emphasized that many insurers are targeting clean energy infrastructure as a crucial component of their long-term strategies. This focus is aligned with both regulatory requirements and the desire to meet the evolving demands of their beneficiaries.
Technology and Innovation in Investment Strategy
As insurers look to navigate an increasingly volatile economic and regulatory environment, technology is playing an increasingly important role. The report highlights that insurers are prioritizing integrated asset allocation (63%) and asset liability management (61%) as key technological initiatives. Regulatory capital integration (51%) also emerged as a critical area where technology could add value, helping insurers streamline compliance with changing regulations.
One of the most promising technological developments identified is the use of AI in private asset modeling, with 53% of respondents seeing it as an essential tool for enhancing investment strategies. By leveraging technology, insurers can better model private assets, ensuring more informed decision-making and optimizing risk-adjusted returns.
Political and Market Risks: Navigating Uncertainty
Despite the optimism around private markets and clean energy, insurers are not without concerns. Political uncertainty, regulatory changes, and rising geopolitical tensions are top risks identified by respondents, with 68% citing regulatory developments and 61% citing geopolitical fragmentation as major macro risks. Interest rate risk (69%) and liquidity risk (52%) are also high on the list of market risks that insurers are monitoring closely.
However, many insurers are taking a measured approach, with 74% reporting no plans to change their current risk profiles. Instead, they are looking to strategic partnerships to augment their internal expertise in risk evaluation and portfolio construction. BlackRock’s report emphasizes the importance of having an investment partner who understands the nuances of the insurance business, as these partnerships help insurers align their strategic priorities with the right investments.
Looking Ahead: A Future of Flexibility and Innovation
As the global economy continues to evolve, insurers are adapting by embracing private markets, clean energy investments, and technological innovation. With a clear focus on long-term growth and sustainability, the findings from BlackRock’s Global Insurance Report paint a picture of an industry that is preparing for the challenges of the future while capitalizing on the opportunities of today. By leveraging these strategies, insurers are positioning themselves to not only navigate economic uncertainty but to drive meaningful change in the global investment landscape.
In conclusion, insurers are stepping up their investments in private assets and clean energy, driven by a commitment to long-term growth, sustainability, and innovation. The continued evolution of technology in asset management further strengthens their ability to meet the challenges of an increasingly complex world.
