Ross Kerber and Simon Jessop

GLASGOW / NEW YORK – In order to maximize yields, insurance companies plan to raise their allocations for private markets from 11% to 14% over the next two-years, officials of BlackRock Inc (NYSE) said.

Charles Hatami is the global head for the Financial Institutions group, the largest asset manager in the world. He described these trends in an interview on Friday with Reuters. The data was based upon a survey that included 362 executives in the insurance industry, who collectively have $27 trillion of assets.

Hatami stated that the results show the industry will continue to embrace risk even after interest rate disruptions caused by the pandemic. According to the survey, 7% of allocations were made by private market assets in 2019.

Hatami explained that “Insurance firms are taking on more risk,”

BlackRock has more than $500 Billion in assets for insurance companies, which is 5% of its $9.5 trillion total assets.

In recent years, alternative assets like infrastructure and private equity have grown in popularity among investors. Central bank money printing made it difficult for interest rates to fall and yields low in the investment-grade bond market.

BlackRock reported that all insurers intend to assume more risk in order to seek out higher-yielding assets within the next two year. It is the highest level of information since BlackRock began tracking it in 2015.

Insurers almost unanimously stated that climate change would have an impact on their portfolios. They also expect to increase their allocations for sustainable investments by around 30% in the next two-years.

Hatami stated that areas such as infrastructure and renewable energy projects, like solar power and windfarms have been attracting a lot of attention from insurers who have invested in products like BlackRock’s Global Infrastructure Debt Fund.

Due to lower liquidity on private markets, 41% said they plan to build their cash-pile to be able to pay for everything.