Traditionally conservative European insurers and pension funds are turning increasingly to risky property bets on everything from new homes in provincial Britain to car parks at Brussels airport, as they feel the pinch from rock-bottom interest rates.

While much is in the form of equity stakes, they are also providing loans secured against property, moving into territory where banks have retreated since the global financial crisis.

“The banks have taken a couple of steps back and are not providing the same amount of credit,” said Johan Held of AFA, a Swedish insurer which has spent one in seven euros of a 20 billion euro ($22 billion) fund on property. “Many of the insurance companies are stepping in to fill the gap.”

At the moment, property, at least in many northern European cities, offers far better returns than conventional investments such as bonds, where yields have been dismal since central banks flooded the financial system with cheap money to revive their economies.

But industry supervisors are alert to the shift into investments such as property, an asset at the heart of the global crisis when sub-prime mortgage debt helped to bring down the likes of Lehman Brothers.

At a time when some people are warning of a property bubble, supervisors fear that insurers, with limited experience of real estate, could underestimate the risks. In the case of pension funds, any disastrous investments could ultimately hurt the elderly by losing money needed to fund their retirement income.

Held played down the risks. “Appreciating values are not going to continue forever,” he said. “However, as long as there is rental growth I do not worry too much about valuations, especially … where interest rates remain at … low levels.”

These are nevertheless largely uncharted waters for insurers or pension funds, which typically concentrate on investing in company stocks and government bonds.

In a recent report on financial stability, the European Insurance and Occupational Pensions Authority signaled it is closely watching developments, noting “an increased risk appetite” since 2008 to preserve investment returns.

The report pointed to insurers turning to investments “previously dominated by the banking industry” – mortgages, infrastructure loans and mortgage backed securities.

Lack of Expertise

Moody’s credit ratings agency has expressed its own doubts over the shift towards assets that are hard to trade such as property.

“There is a general lack of expertise and a track record,” said Dominic Simpson, a Moody’s analyst. “Experience shows that when insurers start to invest in these more esoteric asset classes, they are not always going to invest in the most secure assets.”

European Central Bank data shows insurers and pension funds’ loans in the 19-country euro zone rose around 12 percent between 2011 and late 2015 to more than half a trillion euros.

Those based in Germany accounted for almost 300 billion in loans in 2014 and the Netherlands 120 billion, although the figures gave no break down between property and other lending.

Property investments by insurers and pension funds also take a variety of other forms. These include buying commercial or residential buildings, and taking stakes in developers or specialist real estate investment funds.

One of Britain’s biggest insurers, Legal & General, recently teamed up with a Dutch pension fund to invest $653 million in building thousands of British homes for rent, beginning in the western city of Bristol.

While Spain suffered a property crash as early as 2007, some of the insurance and pension fund money is going into southern Europe – Italian insurer Generali owns buildings in places including Barcelona. However, much of it has been invested in cities to the north where values have soared in recent years.

In a recent study, Swiss bank UBS said house prices in the world’s leading financial centers were “fundamentally unjustified,” putting London at the top of its ‘bubble index’.

The research suggested prices in the British capital or Norway could be overpriced by as much as 40 percent, while Frankfurt and Amsterdam are also overvalued.

Insurers’ exposure to property, not to speak of individual cities, remains small compared with the giant size of their funds, but the strong rises in home prices are making some experts nervous.

Credit underpins property markets and banks, under regulatory pressure to build their capital cushion, are often eager to sell.

There are roughly 4.5 trillion euros of home loans outstanding in Germany, Britain, France and the Netherlands. Dutch mortgage debt totals more than two thirds of the amount in its far bigger neighbor, Germany.

Commercial Uncertainty

The picture for commercial property is also uncertain. In 2014, the ECB flagged a boom in prices for prime commercial real estate, urging banks, insurers and pension funds to be prepared for a change of fortune.

Insurers and pension funds, with fixed commitments to policyholders and the retired, however, cannot wait for interest rates on conventional investments to rise from zero.

“Low interest rates affect just about every part of the insurance business, shrinking the returns on investment and requiring insurers to set aside more capital,” said Michael Heise, chief economist of Allianz, an insurer and one of the globe’s biggest investors.

In an otherwise barren landscape, property offers tempting returns that are five-fold that of government debt to investors such as Belgian insurer Ageas.

It invests around 7 percent of funds in property, including a majority stake in Interparking, which runs car parks including those at Brussels airport. “Real estate is important,” said Bart De Smet, its chief executive. “It’s one of the assets that permits us to achieve a higher yield.”

A global slowdown, as the Chinese economy loses momentum, means that many central banks are unlikely to raise interest rates for some time. ECB President Mario Draghi has made clear that avoiding deflation and getting euro zone inflation back up to its target takes priority.

“We have a mandate and our mandate is to reach price stability,” he told the European Parliament recently, “And that counts first and foremost.”

“The economic situation will improve, interest rates will rise again and both the insurance companies … and the savers who suffer at the present time … will actually be better off.”

($1 = 0.9190 euros)

(Additional reporting by Francesco Canepa and Jonathan Gould in Frankfurt.)