(Bloomberg) — Insurers are increasingly looking to make direct loans and finance commercial properties as central bank policies limit yields on traditional holdings such as government debt and investment-grade corporate bonds, according to BlackRock Inc., the world’s largest money manager.
About 57 percent of insurers plan to increase risk exposure in their portfolios in the next 12 to 24 months, BlackRock found in a survey of insurers that manage more than $6 trillion of assets combined. That compares with 33 percent a year ago, the New York-based company said in a statement Monday.
American International Group Inc. joined Oak Hill Capital Management last year to start a lender serving medium-size companies. TIAA-CREF, led by former Federal Reserve Vice Chairman Roger Ferguson, announced in April that it opened a lender staffed by veterans of Carlyle Group LP as the company seeks borrowers who can’t typically tap public markets.
“Insurers are turning to a broader range of assets, particularly income-generating alternative credit investments such as direct lending, in order to diversify returns and boost income,” David Lomas, global head of BlackRock’s insurance asset management business, said in the statement. “But it isn’t easy, as these markets often aren’t their natural habitat, and there are barriers to being successful here.”
Fidelity & Guaranty Life, the insurer owned by HRG Group Inc., has been hurt by losses on holdings tied to electronics retailer RadioShack Corp., which filed for Chapter 11 bankruptcy in February. HRG has said its Salus Capital Partners unit stopped initiating loans after those losses.