Top findings from May’s quarterly Insurance Breakfast Club…
CAMRADATA hosted its quarterly Insurance Breakfast Club in May and here are the top level findings:
Infrastructure Debt – one insurer had considered this asset class and was comfortable with the liquidity but unfortunately it fell down around the legal agreements as there was concern they could end up holding some real estate at the end of the loan which they didn’t want. That said another insurer held this asset class and some of the others had considered it.
Private Markets – especially private debt is something some are looking at but they are finding there are a lot of managers who are coming out of the woodwork saying they now offer this whereas they are more interested in those who have been doing it for a longer time. That said, there was also a concern that the returns in this asset class are reducing and therefore the thinking is whether they have missed the boat.
Absolute Return – the insurers were generally bullish about Government Stocks, which are yielding above 3% (in the 10 year). Therefore, they questioned whether asset managers offering absolute returns targeting cash plus 3-5% would need to increase their targets to justify insurers moving away from Government Stocks or for them to maintain their exposure to absolute return strategies. That said there still seemed to be much interest in the concept of absolute return strategies.
Illiquid Credits – Illiquid credits esp. distressed debt is invested by some and is definitely an area of continued interest.
CLOs – the recent ruling in the US challenged the risk rule retention such that going forward, CLOs issued in the US may no longer have a 5% risk retention piece and therefore will not be compliant for the purposes of European investors.
Securitisations – there are changes being proposed to European regulations on investment in securitisations that should reduce the capital charge for Type 1 securitisation although Type 2 will remain unchanged.
Equity – some of the insurers were looking to add equity strategies to their portfolio whereas some already had started investing in this area.
Solvency II – insurers are still open to investing in asset classes with slightly higher SII charges esp. as the portfolio can take credit for diversifying its assets and as long as their overall risk bucket is maintained.