Interview, Fireside Chat
Global insurers turn to private credit — and AI
- Insurers are expected to increase risk tolerance in portfolios due to moderating inflation and recession fears, though ongoing economic slowdowns and geopolitical volatility remain concerns.
- Approximately 98% of respondents believe short-term interest rates have peaked and 83% believe long-term rates have peaked, leading to expectations of lower future investment income that may challenge claims payment support.
- To mitigate falling rate risks, insurers plan to add yield now and increase portfolio resiliency by favoring private credit and investment-grade private debt, while projecting private credit returns of 8% to 10% to match public equity.
- Exposure to commercial real estate, specifically office properties and mortgage-backed securities, is expected to decline over a slow 10-to-14-year period due to valuation and refinancing concerns, following a decade of pre-existing reduction efforts.
- The industry, managing approximately $26 trillion in assets, anticipates significant market implications from its collective asset allocation shifts, though private equity and cash returns are projected to be lower due to reduced exit activity and base rate changes.
- AI adoption is forecast to accelerate faster than initially expected, initially focusing on cost savings and productivity before moving to investment and underwriting, potentially driving industry consolidation and enabling more accurate risk pricing.
- European and Asian insurers demonstrate strong commitment to ESG, with over 92% to 95% of respondents planning to integrate environmental and social criteria into investment decisions.
- Climate change is expected to directly influence portfolio performance and underwriting pricing for perils like hurricanes and earthquakes, while ESG strategies are shifting from exclusions toward climate transition and social impact investments.
- Energy transition financing in the United States and impact-oriented strategies in sectors like education and financial services are identified as sources of strong returns, with actual allocation changes expected to largely align with current survey responses.