In an investment regime that could see lower risk-adjusted returns on public credit, private credit’s potential is becoming increasingly attractive to insurers—and was a major talking point at AB’s recent European Insurance Forum. Insurers are warming to the attractions of private assets. But how can they use them to best effect?
The wide variety of private alternative strategies can be deployed across the whole of an insurer’s liability profile, providing attractive risk-adjusted return potential and diversification from public market exposures. In the Display above, we estimate the size of the market for just the leading private asset strategies, which total over £65 trillion in assets alone.
The complete range of private asset strategies offers wide-ranging exposures to both fixed-rate and floating-rate bonds, as well as exposure to inflation-linked securities (although these can be in short supply). This diverse opportunity set allows insurers to match different types of liabilities across their liability profile. For instance, the loans market is predominantly shorter-term and floating-rate, while infrastructure bonds are naturally suited to longer maturities and may offer index-linked coupons. US structured and corporate private placements also feature longer maturities than equivalent corporate bond or bank finance, while senior CLO (collateralized loan obligation) notes offer high-yielding, floating rate alternatives to corporate bonds. NAV loans (typically secured against the assets of private equity portfolios) provide a shorter-term floating-rate alternative.
You can now read the full whitepaper at the link below
