US insurers increase private equity holdings by 10% YoY to $81bn

Written by Adam Cadle

17/07/2020

US insurers increased their private equity holdings by 10% YoY to $81bn in 2019, AM Best has said.

Associate director, industry research and analytics, Jason Hopper said the shift to private equity has been happening over a number of years now.

"Private equity holdings have increased 40% since 2015. Life insurers have been driving that trend and account for about three-quarters of total insurance industry holdings. Commitments for additional investments are also up 10% in each of the last four years, So there has been continued interest also into the future for a couple of years by insurers to continue to stay in ths asset class."

Hopper also highlighted to what extent the COVID-19 pandemic is impacting the private equity market.

“The pandemic has affected pretty much every asset class across the board,” Hopper said. “Private equity closings dropped over 25% YoY in the first quarter of 2020. However, capital raised has increased over 20%. So all these private equity firms are sitting on this lump sum of cash waiting to deploy it. The issue today is how to exactly value these companies when their revenue streams have been either substantially cut or pretty much stopped altogether in the face of the COVID-19 crisis. Once the economic gears start turning again, AM Best believes insurers will contribute more money to this asset class to benefit from that and gain some additional yield.”

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