Key Takeaways
- • U.S. insurance companies are accelerating allocation to private assets in 2023, with large life insurers maintaining 35–45% of general account assets in private holdings, while smaller life insurers hold 10–25% and health/property-casualty insurers typically hold 5–20%.
- • Rising interest rates in 2022 have prompted insurers to pursue higher-yielding private assets opportunistically, including mortgage loans, privately placed investment-grade corporate bonds, infrastructure debt, and structured notes alongside traditional alternatives like private equity and real estate equity.
- • A fall 2022 survey by Conning ($191 billion asset manager) found most insurers plan to increase risk tolerance and further migrate into private assets, reversing the traditional conservative allocation stance of the insurance sector.
- • Insurance companies view private asset allocation as a dual strategy: achieving yield enhancement in a higher-rate environment while diversifying away from public equity and bond markets that faced significant headwinds in 2022.
Summary
U.S. insurance companies are entering 2023 with a deliberate shift toward expanded private asset allocation, driven by both structural yield hunger and improved market conditions. According to Peter Cramer, senior managing director at SLC Management (a $255 billion Boston-based asset manager), insurers were already pursuing alternative asset classes before interest rates surged in 2022, but the rate environment has accelerated the trend. A fall 2022 survey by Conning, a $191 billion asset manager specializing in insurance clients, confirmed that most insurers intend to increase their risk tolerance and allocate meaningfully more capital to private assets this year.
The composition of insurance portfolios reveals a two-tiered strategy. Large life insurers typically maintain 35–45% of their general account assets in private holdings, a mix encompassing mortgage loans, privately placed investment-grade corporate bonds, infrastructure debt, structured notes, private equity, infrastructure equity, real estate equity, and transportation assets, according to Mark Snyder, head of global insurance solutions for North America at J.P. Morgan Asset Management. Smaller life insurers hold considerably less—10–25% of portfolios—while health insurers and property-and-casualty insurers typically allocate only 5–20% to private assets. This disparity reflects differences in capital requirements, liability structures, and investment expertise across insurance segments.
Matt Armas, global head of insurance fixed income portfolio management at Goldman Sachs Asset Management, characterized the current environment as one in which "the client base is opportunistically adding risk and continuing to migrate into private assets." The higher-rate regime that emerged in 2022 has created a compelling environment for this reallocation, as private assets—particularly private credit instruments—offer yield premiums unavailable in public markets. Insurers view this shift not merely as tactical repositioning but as a strategic recalibration of long-term asset allocation, with rising interest rates serving as both catalyst and justification for elevated private asset exposure.
The composition of insurance portfolios reveals a two-tiered strategy. Large life insurers typically maintain 35–45% of their general account assets in private holdings, a mix encompassing mortgage loans, privately placed investment-grade corporate bonds, infrastructure debt, structured notes, private equity, infrastructure equity, real estate equity, and transportation assets, according to Mark Snyder, head of global insurance solutions for North America at J.P. Morgan Asset Management. Smaller life insurers hold considerably less—10–25% of portfolios—while health insurers and property-and-casualty insurers typically allocate only 5–20% to private assets. This disparity reflects differences in capital requirements, liability structures, and investment expertise across insurance segments.
Matt Armas, global head of insurance fixed income portfolio management at Goldman Sachs Asset Management, characterized the current environment as one in which "the client base is opportunistically adding risk and continuing to migrate into private assets." The higher-rate regime that emerged in 2022 has created a compelling environment for this reallocation, as private assets—particularly private credit instruments—offer yield premiums unavailable in public markets. Insurers view this shift not merely as tactical repositioning but as a strategic recalibration of long-term asset allocation, with rising interest rates serving as both catalyst and justification for elevated private asset exposure.
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