European quantitative easing will encourage insurers to increase their exposure to real estate debt as they take on more risk to maintain profit margins, according to BlackRock research.
A poll of global insurance companies which collectively manage $6.5tn (£4.2tn) of assets found that 42% of respondents expected to increase their exposure to property debt over the next two years, more than any other private market asset.
Increased direct property lending was cited by 39% of those polled, while 30% said that they would have a greater appetite for commercial real estate equity investing.
Patrick Liedtke, head of BlackRock’s insurance and asset management business in Europe, said: “Quantitative easing has driven insurers to take on significantly more risk than they have taken on in previous years.”
The research, conducted by the Economist Intelligence Unit on behalf of BlackRock, found that 57% of insurers planned to increase their risk exposure overall in the face of depressed bond yields and weak economic growth.
It also found that 49% of global insurers had made significant changes to their investment strategies in response to quantitative easing and monetary policy.
Overall, 82% of insurers were looking to move into alternative asset classes over the next 24 months, including real estate and real estate lending.
Liedtke said: “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.
He added: “But diversification isn’t easy, because these markets often aren’t insurers’ natural habitat, and there are a number of barriers to being successful here.”
