Life insurers have long relied on high-quality bonds and equities to meet long-term liabilities. But search for yield during the prolonged period of low interest rates led insurers to expand investments into alternative asset classes such as private credit, real estate, infrastructure, hedge funds, and private equity (PE). This trend is most noticeable when PE firms own or otherwise influence insurers to take greater advantage of synergies between their asset management and insurance underwriting businesses.
The resulting shifts in asset allocation are continuing despite higher interest rates and are part of a larger trend away from publicly traded assets and into privately managed assets. Intertwined with this shift in investment portfolios is the increasing use of asset-intensive reinsurance of life insurance liabilities, often offshore. The panel will explore the rationale for this shift, the benefits and risks associated with it, and the financial stability and regulatory implications.
