KKR Finds Insurance Industry Embracing a ‘New World Order’
April 25, 2018
New Macro Report,
“From almost any vantage point, the multi-year decline in interest
rates since the Global Financial Crisis is having an unprecedented
effect on the profitability and sustainability of the entire insurance
business,”
To better understand how cognizant CIOs are of the risk in today’s
environment, McVey and his team, alongside KKR’s Insurance Asset
Management team, conducted a proprietary survey of approximately 50
large, well-capitalized insurance companies that are either existing
clients of KKR or prospects of the firm. Collectively, participants
surveyed oversee nearly
In his latest report,
- To combat today’s challenging investment environment, insurance companies have begun to branch out into a variety of new products, including Structured Products, Alternatives, and Non-Investment Grade Debt. All told, total Non-Traditional Investments and Non-Investment Grade Debt now represent 26.4% of on-balance sheet investment assets for our survey participants, compared to just 17.4% in 2014.
- Within Structured Products, the survey reports greater demand by insurance companies for better capitalized and more transparent securitized investment vehicles, including CLOs, ABS, and CMBS, relative to the pre-Global Financial Crisis.
-
Within the Alternative Investment arena, Private Equity allocations
have nearly doubled to 2.4% since 2014, though Private Credit remains
the largest absolute Alternative allocation at 5.6% of total
allocations versus a 4.7% allocation in 2014. On the other hand,
Hedge Fund allocations fell sharply to just 50 basis points, down meaningfully from 110 basis points in 2014. -
Not surprisingly, life and annuity companies are much more aggressive
allocators toward Private Credit and
Private Real Estate . - Within KKR’s property and casualty universe, there has been a significant increase in Non-Investment Grade Debt, which recently reached 8.4% versus 2.8% in 2014.
- Even though many survey participants believe long-term interest rates have bottomed, KKR and its survey respondents do not see insurance asset allocation returning to prior allocations any time soon.
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About
About KKR
KKR is a leading global investment firm that manages multiple
alternative asset classes, including private equity, energy,
infrastructure, real estate and credit, with strategic manager
partnerships that manage hedge funds. KKR aims to generate attractive
investment returns for its fund investors by following a patient and
disciplined investment approach, employing world-class people, and
driving growth and value creation with KKR portfolio companies. KKR
invests its own capital alongside the capital it manages for fund
investors and provides financing solutions and investment opportunities
through its capital markets business. References to KKR’s investments
may include the activities of its sponsored funds. For additional
information about
The views expressed in the report and summarized herein are the
personal views of
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