Insurers in the Asia-Pacific region are eyeing a significant shift in their investment strategies. According to new research by FinTech firm Clearwater Analytics, they are planning to increase allocations to private markets and hedge funds from 20% to 33% of portfolios over the next five years. The study surveyed insurance asset management executives overseeing $3.82tn in assets.
At present, APAC insurers manage around 20% of their assets in private markets. According to the study, executives in Hong Kong, Singapore, and Australia anticipate growing allocations to private equity, venture capital, private credit, and alternative strategies as part of a broader diversification strategy. Third-party managers are particularly optimistic, with nearly one-third forecasting dramatic increases in diversification over the next three years, compared with smaller percentages among life, health, and general insurers.
Nevertheless, operational challenges remain a concern. 41% of respondents cited legal and compliance complexities, while 29% reported difficulties in integrating private market assets with traditional public holdings.
The study also found that 96% of executives expect heightened merger and acquisition activity over the next three years, further underscoring the need for insurers with strong operational capabilities to gain competitive advantages in a consolidating market.
Technology appears to be a key enabler for managing these challenges. Nine in 10 respondents reported that their systems are very or quite effective at processing new asset classes, and 92% found it easy to determine the fair value of private market assets.
Clearwater Analytics’ Chief Strategy Officer and President of Asia Pacific, Shane Akeroyd, said, “APAC insurers are convinced of the attractiveness of private markets, which have consistently delivered strong returns. However, legal, compliance, and integration issues must be addressed with robust technology and platforms.”
While private market allocations are set to surge, insurers are expected to moderately increase public market investments over the next 24 months. The study highlighted that equities, public fixed income, and real assets are expected to grow, but at a slower pace than private equity, private credit and hedge funds. This planned shift reflects a broader trend in APAC insurance investment strategies, where diversification, operational efficiency, and strategic technology adoption are poised to determine the winners and losers in an increasingly competitive landscape.