BlackRock survey: insurer appetite for PE wanes

The proportion of insurers planning to increase their allocation to private equity fell by around one-third, according to the world's largest asset manager.

Insurer appetite for private equity has dropped over the past year, according to a report by BlackRock.

In survey of 300 insurance executives with estimated assets under management of $9.7 trillion, the asset manager’s Global Insurance Report 2017 found one-third plan to increase their exposure to private equity as of July, down from around half last year. The proportion of insurers planning to decrease their allocation to the asset class also rose to 15 percent from 11 percent.

The decline comes amid heightened demand for private assets: 39 percent of respondents plan to increase their allocation to private assets over the next 12 to 24 months, the highest positive reading for any asset class and more than double the 16 percent recorded last year.

“We have the capacity to re-risk our life insurance balance sheet here in the UK to the tune of at least another £5 billion ($6.7 billion; €5.7 billlion) of illiquid assets,” Tom Stoddard, chief financial officer at London-headquartered insurer Aviva Investors, said in the report. “And as we write new business we’ve got a steady demand for more illiquid assets.”

Commercial real estate was the most attractive private asset, with 34 percent planning to increase their allocation. By contrast, just 6 percent plan to raise their exposure to commodities, with the number of those planning to decrease their allocation more than doubling to 45 percent.

Insurers have rated private equity as the asset class with the highest potential returns, according to Goldman Sachs Asset Management’s 2017 Insurance Survey. The same report found that 34 percent of insurers plan to increase their allocation to the asset class, up from 24 percent last year.

Asian insurers in particular are expected to raise their allocation to alternatives over the next three years, a June report by research firm Cerulli Associates found. China’s insurance companies, one of the world’s largest pools of institutional capital, are expected to continue their quest for more alternative investments, driven by the search for higher yields and positive government policies, according to a report from Moody’s in September.