Insurers find equilibrium amid higher rates

Fewer insurers are making significant changes to asset allocations, according to our fifth annual EQuilibrium global institutional investor survey. But our headline finding obscures a more nuanced picture when we look into the data.

There, we see insurance companies continue to make portfolios adjustments, albeit on a smaller scale compared with the repositioning over the past few years. The diversity of approaches to investing in private assets is also evident.

Our forward-looking survey asked 235 insurance companies globally (along with 565 other institutional investors) about their views on the macro environment and portfolio construction. Their responses reveal insights into how these insurance companies are managing $6 trillion in assets.

Settling into a new status quo

It seems insurers have settled into a new equilibrium. This follows the significant portfolio changes over the last two years as we moved into the new more normalized interest rate environment.

Only 17% said they were making foundational changes to strategic asset allocations compared with one in three in 2023, and 27% were making significant tactical allocation changes compared with 44% in 2023.

Furthermore, uncertainty levels moderated, with 59% stating uncertainty levels are greater than normal. That’s down from 69% a year ago.

Breaking down the components of this showed that, unsurprisingly, geopolitical uncertainty remained elevated, with 78% perceiving greater than normal uncertainty.

The decline in the headline figure was driven largely by macroeconomic views. 43% stated economic growth uncertainty was greater than normal (compared with 63% previously). Capital markets were also a factor, with 54% stating capital market uncertainty is greater than normal (compared with 61% a year ago).

Please indicate your organization’s view about the level of uncertainty in the following macroeconomic areas. (235 respondents)

Regional differences revealed in private asset selections

95% of insurers plan to maintain or increase their private market allocations over the next five years. And over the next two years, private fixed income is the most popular route for doing this.

While the well-established private credit, infrastructure and real estate debt remain popular, we’re also seeing net new money going into niche and specialized areas such as net asset value (NAV) lending (which is a form of fund financing) and junior capital in the middle market lending space. In many cases, these assets are viewed as a complement to senior loan allocations in portfolios, offering diversification, spread and idiosyncratic risk exposure.

Regional differences show up when we look beyond the headline figures. U.S. insurers appear to be more interested in esoteric asset-backed securities and collateralized loan obligations than their peers in other countries. In Europe, consumer finance, credit tenant loans and private infrastructure find favour among U.K. insurers, while German insurers are exploring private infrastructure debt, including energy infrastructure credit, and junior and mezzanine debt. In Asia Pacific, digital infrastructure assets, private credit within the region and royalty streams are garnering interest.

Percent of insurers who plan to increase allocations to the following private fixed income investments over the next two years. (Respondents: 73 North America, 90 EMEA, 56 APAC insurers who plan to increase allocations to private fixed income)

For further insights into how insurers globally are investing in 2025, download EQuilibrium.