Investment grade debt allocations among insurance CIOs surge back to 56.6% of total assets

Written by Adam Cadle

01/05/2024

Investment grade debt allocations among insurance CIOs have surged back to 56.6% of total assets, from 48.5% in 2021, according to KKR’s latest report into the global insurance market.

KKR said the increase is due to the rise in interest rates, but investment grade debt allocations have not fully rebounded to peak levels seen in 2017.

Despite the record increase in interest rates in recent quarters, insurers’ allocations to non-traditional investments, including alternatives, declined only slightly to 28.9% in 2024, from 31.8% in 2021, but were still well above 20.3% in 2017.

Within non-traditional investments allocations to structured credit, such as CLO debt, asset-based finance, and other tradeable structures, increased the most, from 5.9% of portfolios in 2017 to 8.3% in 2024, with US insurers having the highest allocations to the asset class.

Private credit allocations, which jumped to 7.7% in 2021, fell back to their 2017 levels of around 5.3% as CIOs shifted their portfolios to take advantage of higher yields in more liquid products as rates increased. However, private credit remains attractive to CIOs, with most choosing the asset class as their top choice for future allocations.

Infrastructure and private equity also rank high on the list for future allocations, and CIOs are now finally seeing more opportunity in real estate equity after the recent compression in values.

KKR said asset allocation priorities vary by type of insurer. On average, life and annuity CIOs tend to allocate more to structured credit and real estate credit, while P&C CIOs tend to hold more than the average in private equity, public equities, and bank loans and high yield.

Similarly, allocation preferences vary by region, with Europe-based CIOs allocating more to private credit and infrastructure, while Asia-based CIOs are leaning more heavily into real estate credit.

KKR surveyed nearly 50 insurance companies and CIO survey respondents, overseeing more than $8trn in assets.

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