Insurers have historically relied on the comfortable, predictable income flows that investment grade bonds provide to their portfolios, allowing for clear attribution, risk analysis, and simplicity of matching their long-dated liabilities.
While that is still true, with bonds making up roughly 60-65% of a typical insurers portfolio, the rise of private assets and alternatives coupled with the low interest rate environment imposed by COVID has led many insurers to transform their portfolios and explore new products like private credit, real assets, and complex structured products (CLOs, RMBS, ABS, etc.) to capture new yields with tailored risk.
Naturally, this has led to an increase of insurers standing up in-house asset management arms and strategic partnerships with asset managers.
This evolution has allowed insurers to capture previously inaccessible revenue streams, but at the cost of increased complexity as firms build out and acquire asset management arms and expand their asset class coverage.
