Insurers are increasingly turning toward non-traditional assets to increase their yield, according to Clearwater Analytics’ annual Insurance Investment Survey Report.

“The search for yield amid low interest rates has driven insurers into non-traditional asset classes and away from traditional safe havens,” Sandeep Sahai, Chief Executive Officer of Clearwater Analytics, said in prepared remarks. “This creates significant challenges because non-traditional asset class data is often extremely complex and deciphering it requires multiple systems and manual processes, which brings serious risk for misinterpretation or misguided action. This report demonstrates the urgency of working with trusted partners to ensure accurate and timely accounting.”

Approximately 55 percent or more insurers indicated they have some level of allocation to Private Placements, Private funds, Mortgage Loans and ETFs (Exchange Traded Funds), Clearwater Analytics found.

Additionally, investment increased in areas including forwards (341 percent), futures (264 percent), syndicated loans (145 percent), swaps (132 percent) and options (82 percent). As well, there is a growing use of investment vehicles such as bank loans and derivatives, according to the study.

Also, about 70 percent of large insurers are now invested in equity stakes. Approximately 43 percent plan to increase their stakes, while none will be decreasing their investment, the study found.

In another sign of the change in insurers’ investment approach, 32 percent of respondents said they trust external managers with 80 percent to 100 percent of their portfolio. Also, 86 percent of respondents said they use an external manager to some capacity. Both statistics underscore the increased reliance on outside sources for investment advice, Clearwater Analytics said.

Another item worth noting – just 8 percent of organizations pursue a daily analysis on their investment portfolio risk, Clearwater Analytics said, though many are using new account technologies to combat this.

For the study, Clearwater Analytics surveyed insurers globally over two months in 2021, including respondents from the Americas EMEA, APAC and offshore. More than 1,000 insurance professionals took part overall, half of which said they worked in investment accounting. The rest were divided between operations and investment management.

Source: Clearwater Analytics

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