Skip to main content
PGIM LogoPGIM Logo
  • Inhalt auf Englisch

    • Megatrends
    • Jahresbericht „Beste Ideen“
    • OutFront Serie
    • Portfolioforschung
    • Der Quartalsausblick
    • Marktgeschehen
    • Thought Leadership
    • Veranstaltungen & Webinare
    • Videobibliothek
    • Podcasts
    • Investments und ESG
    • In Alternativen investieren
    • Investitionen an Schwellenmärkten
    • Mit Risiken umgehen
  • Alternativen

    • PGIM Private Alternatives
    • PGIM Private Capital
    • PGIM Real Estate
    • Montana Capital Partners (PE)

    Aktien und Anleihen

    • PGIM Fixed Income
    • Jennison Associates

    Beratung

    • PGIM Multi-Asset Solutions
    • PGIM Quantitative Solutions

    ZWISCHENVERTRIEB

    • PGIM Investments
  • Inhalt auf Englisch

    • Kunden, für die wir arbeiten
    • Institutionelle Beziehungen
    • Globale Standorte
    • Kontakt
  • Inhalt auf Englisch

    • Überblick
    • Kompetenz
    • Geschichte
    • Integration & Diversität
    • Globale Standorte
    • Kontakt
    • Newsletter-Anmeldung
    • Informationen anfordern
  • Inhalt auf Englisch

    • Karriere bei PGIM
    • Stellenangebote
    • Newsroom
    • Pressemeldungen
    • In den Nachrichten
    • Zahlen & Fakten
    • Ansprechpartner für Journalisten
abstract
Annual Best Ideas

Navigating the Nexus: The Intersection of Insurance and Private MarketsNavigatingtheNexus:TheIntersectionofInsuranceandPrivateMarkets

16. Jan. 2025

  • Download PDF
Teilen
  • Mail
  • LinkedIn
  • Twitter
  • Copy URL
  • Print

Teilen

Insurers are playing a central role in establishing a new market paradigm. The maturation of private markets has led to profound change across the global investment landscape. Private markets are experiencing rapid growth. Meanwhile, public equity markets have become dominated by fewer companies with greater concentration at the top, and in public debt markets, banks have been retrenching from lending since the Global Financial Crisis and the implementation of Dodd-Frank regulations.

In a rethink of their investment approach, insurers are increasing their allocations to private credit and structured asset strategies, underpinning the expansion of private markets. As this insurance-driven shift continues to evolve, it will be imperative for investors to understand the possible implications for liquidity management, pricing transparency and risk management, as well as the emerging opportunity set.

Some examples of past paradigm shifts include the 1980s boom of the junk-bond market, which swelled from $10 billion in 1979 to $189 billion in 1989.1 Junk bonds were instrumental in the financing of leveraged buyouts, which in turn ignited a rapid expansion in private equity, as long-term allocators such as pension and endowment funds focused on alternative assets. The rise of passive investing and its impact on public markets, including a decline in the number of public companies, also led to significant change in market structures. It is from the nexus of private markets and insurance that a new market paradigm is emerging.

While insurance is certainly not new, insurers representing a source of “permanent capital” is a more recent phenomenon. The U.S. insurance market grew 331% from 2000 to 2021,2 and its total value was estimated at $1.2 trillion by the end of 2023.3 Furthermore, annuities sales were $216.6 billion during the first half of 2024, representing an increase of 20% from the same period a year earlier and putting the market on pace for a third consecutive annual sales record.4

Figure 1: LIMRA Annuity Sales Estimates

Source: Life Insurance Marketing and Research Association’s (LIMRA) U.S. Individual Annuities Survey. Data shown references period from 2014 to 2023.

With this pool of long-term capital growing, insurers are increasingly allocating toward private assets, especially the credit space. Direct lending has accounted for much of private credit’s growth (Figure 2a), reflecting a decline in banks’ share of leveraged loans and a rapid expansion of private equity (Figure 2b). Growing investor interest in private markets has led to the proliferation of new private credit strategies as well, and insurers are providing access to the permanent capital that is financing these opportunities. One such growing opportunity is asset-backed finance (ABF). Insurers have been gradually increasing their market share in ABF, seeking the higher yields this asset strategy tends to generate (Figure 3).

Figure 2A

Growth of Private Credit Assets

Source: Prequin. Data shown references period between 2000 and 2024.

Growth of Direct Lending Assets

Source: Prequin. Data shown references period between 2000 and 2024.

Figure 2B: Bank Lending Pullback

Share of Leveraged Loans

Source: S&P LCD. Data shown references period between 1994 and 2020.

Figure 3: Private ABF Market's Rapid Growth Seems Set to Continue

Note: Growth expectations are not guaranteed and subject to change.
Source: Integer Advisors forecast and KKR. As of September 2024.

The market transformation emerging from the nexus of insurance and private markets is still in the early innings. However, it is important to examine the potential implications as insurance (capital allocators) and private credit and ABF funds (capital seekers) begin to shift market dynamics.

Untangling the Implications

The shift from public to private assets will compel investors to take a holistic approach to portfolio construction, including comprehensive risk and liquidity management that accounts for both the opportunities and challenges emerging in this new paradigm. Careful attention must be paid to asset-liability management (ALM) principles, as these form the bedrock of sustainable insurance investment strategies and allow for the proper design, implementation, and monitoring of the strategic asset allocation. Private assets including ABF are typically shorter in duration and often floating, which means investing in them to access better yield should be complemented with allocations to more liquid and longer-duration assets to mitigate ALM risk. Moreover, robust credit monitoring capabilities help ensure early identification of potential issues, while building sector and geographic diversification into the portfolio mitigates concentration risk. Correlation analysis with existing portfolio exposures supports optimal construction as well.

Given the changes in strategic asset allocations among insurers and related shifts in market dynamics, regular liquidity stress testing and adequate liquidity buffers ensure that portfolios can remain resilient under possible adverse scenarios that develop, and detailed contingency funding planning provides protection against market disruptions. Effective ALM should consider the cash flow profile of the liabilities and ensure liquidity, interest rate, and other risks are properly mitigated through both portfolio construction and well-designed hedging strategies.

For insurers with sufficient liquidity tolerance, private ABF represents an attractive source of additional yield with spreads that represent significant alpha generation potential. Private ABF strategies also benefit from comprehensive structural protections and robust collateralization mechanisms that enhance credit quality, as well as underlying asset exposure that offers material diversification benefits compared with traditional debt portfolios.

Direct lending strategies, implemented through rated feeder and CLO structures, also represent a dynamic approach to capturing attractive yields while optimizing regulatory capital requirements. The rated feeder structure offers significant regulatory capital advantages for US- and Bermuda-domiciled insurers through optimized risk-based capital treatment.

Conclusion

The alpha opportunity set in private credit markets has expanded significantly. However, with this growth, markets have become increasingly complex. As insurance asset managers continue to develop their capabilities, the focus must remain on:

  • Maintaining disciplined ALM practices
  • Balancing key stakeholder interests
  • Monitoring systemic risks from the ongoing market structure evolution
  • Preparing for potential regulatory changes
  • Ensuring robust risk management frameworks that address both traditional and emerging risks

The combination of asset-management expertise with sophisticated ALM capabilities positions insurance asset managers to optimize strategic asset allocation and identify tactical allocation opportunities to capture additional relative value. For investors, success in this evolving landscape will require having a partner who has the appropriate frameworks, tools and expertise to evaluate, implement and monitor these strategies, and who prioritizes risk management, liquidity considerations, and portfolio construction to ensure sustainable long-term results.

 

1. The Library of Economics and Liberty. Junk Bonds. https://www.econlib.org/library/Enc/JunkBonds.html. Accessed December 2024.

2. Atlas Magazine. (2023, May 11). The American Insurance Markets, the World’s Number One Market. https://www.atlas-mag.net/en/article/the-american-insurance-market-the-world-s-number-one-market. Accessed December 2024.

3. National Association of Insurance Commissioners. U.S. Life and A&H Insurance Industry Analysis Report. https://content.naic.org/sites/default/files/topics-industry-snapshot-analysis-reports-2023-annual-report-life.pdf. Accessed December 2024.

4. Life Insurance Marketing and Research Association. (2024, September 18). Building on the Record Annuity Sales Momentum. https://www.limra.com/en/newsroom/industry-trends/2024/building-on-the-record-annuity-sales-momentum. Accessed December 2024.

Visit Website
PGIM Multi-Asset Solutions

Providing integrated solutions across public and private markets with portfolio strategy and asset allocation expertise.

Visit Website

Erfahren Sie mehr
Alpha Opportunities Beyond the Macro Volatility

PGIM’s Best Ideas highlight a host of areas where we believe investors will find promising opportunities.

Erfahren Sie mehr

Explore more ideas

Not All AAA CLO ETFs Are Created Equal
Annual Best Ideas

Not All AAA CLO ETFs Are Created Equal

16. Jan. 2025

Not all AAA CLO ETFs are created equally, potentially leading to a wide dispersion in performance—especially during a down-market cycle.

Compelling Opportunities in Industrial Markets on the U.S./Mexico Border
Annual Best Ideas

Compelling Opportunities in Industrial Markets on the U.S./Mexico Border

16. Jan. 2025

The growth in border industrial demand is occurring alongside heightened uncertainty about U.S. trade policy that is unlikely to fade soon.

Enhancing Diversification Through Non-Sponsored Direct Lending
Annual Best Ideas

Enhancing Diversification Through Non-Sponsored Direct Lending

16. Jan. 2025

A diversified portfolio of sponsored and non-sponsored loans can provide investors with a broader range of deals and potentially better performance over time.

Unlocking Liquidity: The Distribution Edge of Lower Mid-market Private Equity
Annual Best Ideas

Unlocking Liquidity: The Distribution Edge of Lower Mid-market Private Equity

16. Jan. 2025

The era of private equity flourishing under low interest rates, followed by a blend of optimism after the COVID-19 pandemic, has shifted.

Artificial Intelligence: An Accelerating Revolution
Annual Best Ideas

Artificial Intelligence: An Accelerating Revolution

16. Jan. 2025

Today, the revolutionary impact of AI-driven change is becoming evident in most industries and is accelerating.

Uncovering Opportunities Across Emerging Markets
Annual Best Ideas

Uncovering Opportunities Across Emerging Markets

16. Jan. 2025

Investors have historically favored emerging markets for their high growth potential, relative inefficiency and diversification benefits.

Rethinking ‘Safe’ Withdrawal Rates
Annual Best Ideas

Rethinking ‘Safe’ Withdrawal Rates

16. Jan. 2025

Perspectives on portfolio withdrawal rates by integrating spending flexibility and an outcomes metric that better captures the anticipated retiree sentiment.

Important Information

For Professional Investors Only. Past performance and forecasts are no guarantees or reliable indicators of future results. All investments involve risk, including the possible loss of capital. Diversification does not assure a profit or protect against loss in declining markets. No investment strategy or risk management technique can guarantee returns or eliminate risk in any market environment.

These materials are for informational or educational purposes only. This information is not intended as investment advice and is not a recommendation about managing or investing assets or an offer or solicitation in respect of any products or services to any persons prohibited from receiving such information under the laws applicable to their place of citizenship, domicile or residence. In providing these materials, PGIM is not acting as your fiduciary. These materials represent the views, opinions and recommendations of the author(s) regarding the economic conditions, asset classes, securities, issuers or financial instruments referenced herein. Certain information has been obtained from sources that PGIM believes to be reliable as of the date presented; however, PGIM cannot guarantee the accuracy of such information, assure its completeness, or warrant that it will not change. This information, including projections and forecasts, is current as of the date of issuance (or an earlier referenced date) and is subject to change without notice. PGIM has no obligation to update such information; nor do we make any express or implied warranties or representations as to the completeness or accuracy or accept responsibility for errors. PGIM and its affiliates may develop and publish research that is independent of, and different than, the recommendations contained herein.

The investments and returns discussed herein do not represent any PGIM product. This material is not intended to be used as a general guide to investing or as a source of any specific investment recommendations. Distribution of this information to any person other than the person to whom it was originally delivered is unauthorized, and any reproduction of these materials, in whole or in part, or the divulgence of any of the contents hereof, without prior consent of PGIM is prohibited.

Collapse section
  • Insights

    • Megatrends
    • Die besten Ideen des Jahres
    • Der Quartalsausblick
    • Marktgeschehen
    • Thought Leadership
    • Veranstaltungen & Webinare
  • Investmentthemen

    • Investments und ESG
    • In Alternativen investieren
    • Investitionen an Schwellenmärk
  • Kunden

    • Kunden, für die wir arbeiten
    • Institutionelle Beziehungen
  • Über uns

    • Überblick
    • Kompetenz
    • Geschichte
    • Integration & Diversität
    • Globale Standorte
    • Kontakt
    • Newsletter-Anmeldung
    • Informationen anfordern
  • Karriere

    • Karriere bei PGIM
  • Neuigkeiten

    • Aktuelle Neuigkeiten
    • Pressemitteilungen
    • In den Nachrichten
    • Zahlen und Fakten
    • Medienkontakte
PGIM Logo
  • Allgemeine Geschäftsbedingungen
  • Datenschutzzentrum
  • Barrierefreiheit Hilfe (Auf Englisch)
  • Cookie-Einstellungen

Ausschließlich für professionelle Investoren bestimmt. Alle Investments bergen Risiken, darunter auch das Risiko des Kapitalverlusts.

Dieses Material dient ausschließlich der Information und darf nicht als Anlageberatung oder als Angebot oder Aufforderung zum Erwerb in Bezug auf Produkte oder Dienstleistungen für Personen verstanden werden, denen es gemäß den Gesetzen, die für das Land ihrer Staatsbürgerschaft, ihres Wohnsitzes oder ihres Aufenthaltsortes gelten, untersagt ist, solche Informationen zu entgegenzunehmen. PGIM ist die wichtigste Vermögensverwaltungsgesellschaft von Prudential Financial, Inc. und ein Handelsname von PGIM, Inc. und den weltweiten Tochtergesellschaften des Unternehmens. PGIM, Inc. ist ein bei der U.S. Securities and Exchange Commission („SEC“) registrierter Anlageberater. Die Registrierung bei der SEC setzt keine bestimmte Befähigung oder Ausbildung voraus.

Die Informationen auf dieser Website sind nicht als Anlageberatung gedacht und stellen keine Empfehlung zur Verwaltung oder Anlage Ihrer Altersvorsorge dar. Durch die Bereitstellung der Informationen auf dieser Website handeln PGIM, Inc. und ihre Tochtergesellschaften nicht als Ihr Treuhänder.

Im Vereinigten Königreich werden Informationen von PGIM Limited bereitgestellt, mit eingetragenem Firmensitz: Grand Buildings, 1-3 Strand, Trafalgar Square, London, WC2N 5HR. PGIM Limited ist von der britischen Finanzdienstleistungsaufsichtsbehörde (Financial Conduct Authority – FCA) zugelassen und wird von dieser reguliert (FRN 193418). Im Europäischen Wirtschaftsraum („EWR“) werden Informationen von PGIM Netherlands B.V. bereitgestellt, eingetragener Firmensitz: Gustav Mahlerlaan 1212, 1081 LA Amsterdam, Die Niederlande. PGIM Netherlands B.V. ist von der niederländischen Finanzmarktaufsicht (Autoriteit Financiële Markten, „AFM“) in den Niederlanden unter der Registrierungsnummer 15003620 zugelassen und ist auf der Grundlage eines europäischen Passes tätig. In bestimmten EWR-Ländern werden Informationen von PGIM Limited, soweit die zulässig ist, unter Berufung auf Bestimmungen, Ausnahmen oder Lizenzen präsentiert, die PGIM Limited im Rahmen von zeitlich begrenzten Zulässigkeitsregelungen nach dem Austritt des Vereinigten Königreichs aus der Europäischen Union zur Verfügung stehen. Diese Materialien werden von PGIM Limited und/oder PGIM Netherlands B.V. an Personen ausgegeben, die professionelle Kunden im Sinne der Regeln der FCA sind und/oder an Personen, die professionelle Kunden im Sinne der jeweiligen lokalen Gesetzgebung zur Umsetzung der Richtlinie 2014/65/EU (MiFID II) sind. 

In Italien werden Informationen von PGIM Limited, die von der Commissione Nazionale per le Società e la Borsa (CONSOB) für die Geschäftstätigkeit in Italien zugelassen wurde.

In Japan werden die Informationen durch die PGIM Japan Co., Ltd. („PGIM Japan“) und/oder PGIM Real Estate (Japan) Ltd. („PGIMREJ“) bereitgestellt. PGIM Japan, ein bei der japanischen Behörde für Finanzdienstleistungen (Financial Services Agency) registrierter Finanzwertpapierdienstleister (Financial Instruments Business Operator), bietet verschiedene Anlageverwaltungsleistungen in Japan an. PGIMREJ ist ein japanischer Immobilienverwalter, der beim örtlichen Finanzamt von Kanto in Japan registriert ist.

In Hongkong werden die Informationen von PGIM (Hong Kong) Limited bereitgestellt, einem von der Börsenaufsicht in Hongkong regulierten Unternehmen. Die Bereitstellung erfolgt an professionelle Investoren im Sinne von Section 1 Part 1 von Schedule 1 der Securities and Futures Ordinance (Cap.571). In Singapur werden die Informationen durch PGIM (Singapore) Pte. Ltd. herausgegeben, einem von der Finanzaufsicht von Singapur (Monetary Authority of Singapore) unter einer Kapitalmarktdienstleistungslizenz zur Fondsverwaltung regulierten Unternehmen und ein sogenannter Exempt Financial Adviser. Dieses Material wird von PGIM Singapore als allgemeines Informationsangebot für „institutionelle Investoren“ gemäß Section 304 Securities and Futures Act 2001 of Singapore (SFA) und für „akkreditierte Investoren“ und andere relevante Personen gemäß den Bedingungen aus Section 305 SFA bereitgestellt. In Südkorea werden die Informationen von PGIM, Inc. bereitgestellt. PGIM Inc. verfügt über die notwendige Zulassung, Dienstleistungen im Rahmen der diskretionären Anlageverwaltung grenzüberschreitend direkt an qualifizierte institutionelle südkoreanische Investoren zu erbringen.

Prudential Financial, Inc. („PFI“) aus den USA gehört weder zum Unternehmensverbund Prudential plc., der seinen Hauptsitz im Vereinigten Königreich hat, noch zum Unternehmensverbund Prudential Assurance Company, einer Tochtergesellschaft von M&G plc. mit Hauptsitz im Vereinigten Königreich. 

PGIM, das PGIM-Logo und das Rock-Design sind in zahlreichen Ländern weltweit eingetragene Dienstleistungsmarken von PFI und ihren verbundenen Unternehmen. 

© 2022 PFI und zugehörige Unternehmen.

You are viewing this page in preview mode.

Edit Page