In this episode of AMBestTV, Jason Hopper, associate director, industry research and analytics of AM Best, said that insurers have increased their private equity holdings by 10% year over year to $81 billion in 2019. Click on http://www.ambest.com/v.asp?v=privateequity620 to view the entire program.
Hopper said that insurers have been shifting more money to private equity investments in the last few years.
"Private equity holdings have increased 40% since 2015," said Hopper. "Life insurers have been driving that trend and account for about three-quarters of total insurance industry holdings. Commitments for additional investments are also up 10% in each of the last four years. So there has been continued interest also into the future for a couple of years by insurers to continue to stay in this asset class."
Hopper also highlighted to what extent the pandemic is impacting the private equity market.
"The pandemic has affected pretty much every asset class across the board," said Hopper. "Private equity closings dropped over 25% year over year in the first quarter of 2020. However, capital raised has increased over 20%. So all these private equity firms are sitting on this lump sum of cash waiting to deploy it. The issue today is how to exactly value these companies when their revenue streams have been either substantially cut or pretty much stopped altogether in the face of the COVID-19 crisis. Once the economic gears start turning again, AM Best believes insurers will contribute more money to this asset class to benefit from that and gain some additional yield."
To access the related market segment report, titled, "U.S. Insurers’ Private Equity Holdings Continue to Climb," please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=298682.*
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