No insurer to have SAA to private markets of under 5% by 2023 - research

Written by Adam Cadle

15/11/2021

No global insurer expects to have a strategic asset allocation (SAA) to private markets of less than 5% by 2023, findings from a survey carried out by BlackRock have revealed.

Diversification and superior return potential in private markets means that by 2023, global insurers believe their average private-market allocations will reach 14% of their total portfolios, versus around 11% currently.

However, as insurers increase their risk appetite, liquidity remains a key priority. As a result, 41% of insurers are looking to increase their cash allocations over the coming year. ETFs are also seen as an effective tool to manage liquidity and enhance yield with 87% of respondents anticipating that liquidity management could be a key factor to increasing allocation to ETFs over the next one to two years.

On the issue of climate risk, 95% of insurance company executives have confirmed it will have a significant impact on portfolio construction over the next two years.

The survey also revealed that nearly two thirds of insurers are looking to increase spending on technology over the next two years. In particular, the industry is moving towards integrated asset and liability management (ALM) capabilities due to the competitive landscape, regulatory complexity, and the economic environment. Over the next two years, 56% of respondents plan to focus on ALM integration, with 45% prioritising multi-asset risk management. This is driven by the push to diversify investments, specifically into private markets, which has highlighted the need for a signle technology solutions with a whole portfolio view across a full spectrum of asset classes.

BlackRock consulted 362 insurance company executives across 26 markets on their investment intentions and business priorities for the year ahead. In total, the participating firms represent US$27trn in investable assets.

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