Following blockbuster years where private equity investments by insurance companies in the United States grew notably, U.S. insurance company private equity investments slowed in 2022, rising just 3.3 per cent during that year to USD $132-billion, according to a new report from AM Best, entitled Growth in Insurers’ Private Equity Investments Slowed Significantly in 2022.

The report notes that U.S. insurers’ private equity holdings grew 37 per cent in 2021 and 14.8 per cent in 2020.

“Low interest rates until 2021 resulted in record-breaking performance for private equity,” says Helen Andersen, industry analyst, research and analytics with AM Best. “Demand slowed in 2022 though, as rising rates and concerns about recession led to a sharp decline in leveraged transactions, exits and fund-raising during the second half of the year.” 

The report says the banking industry became reluctant to lend for leveraged transactions in midsummer 2022 and smaller transactions requiring less debt became more common. “Venture activity also declined in the second half of 2022,” they add. “Venture capital and leveraged buyout fund investments by health insurers decreased and were largely stagnant for property and casualty insurers.” 

More than half of all private equity holdings are concentrated among 15 insurers which have sophisticated investment management teams, they add. Ten insurers accounted for more than 60 per cent of the year’s acquisitions by book value. “Roughly 60 per cent of insurers had new investments totalling less than $5-million each, with many other insurers making no new private equity investments in 2022.”