Swiss Re is forecasting a 40 per cent rise in investment income in the eight largest life markets globally in the five years leading up to 2027, driven primarily by higher bond yields.
This, they say, will lead to competition between listed and private equity-owned insurers. This competition is expected to intensify as business models increasingly converge. In Europe, they say regulators are more skeptical about private equity, making their entry into the life insurance sector slower than in other markets.
“Asset management capability will be the first differentiator in the race to acquire new assets. Attractive and competitive product offerings will be a second differentiator,” the company says in a recent note, Competing for assets: Life insurance in growth mode.
Pension fund de-risking
They add that insurance companies today are also tapping a new supply of portfolio-level deals and bulk annuities from corporations and pension funds seeking to de-risk liabilities.
“For life insurance companies, higher interest rates are a strong incentive to acquire assets. After the years of low rate incentivized listed insurers to divest assets, often to private equity investors, todays’ environment enables strong, profitable balance sheet growth,” they state. “We expect 40 per cent growth in the industry’s investment income in key markets by 2027.”
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Higher interest rates transforming outlook for life insurers’ growth and profitability
