U.S. property/casualty insurers’ investment position in other alternative investments as reported is concentrated within a few large insurers and is relatively stable as a percentage of invested assets for the last several years. Also, the attraction to alternative investments, including hedge funds, private equity investments and limited partnerships, may be waning as higher interest rates make fixed income yield more attractive, and equity markets outperformed many alternative asset classes recently.
In a new report, “U.S. Property/Casualty Insurers’ Alternative Investments,” Fitch reports on the P/C industry’s exposure to alternative invested assets, largely utilizing U.S. statutory financial statement data from Schedule BA, and focusing on the alternative investment allocation and performance for 52 insurer groups with the largest alternative holdings at year-end 2017.
P/C insurers’ allocation to Schedule BA assets held relatively steady at 9 percent of invested assets as the industry continues to maintain a conservative asset allocation. P/C insurers’ investment strategy typically focuses on high-quality municipal, corporate and government fixed-income securities in recognition of their substantive liability risk. A large number of industry participants have very limited or no asset allocation to alternative investments, Fitch found.