Alternative opportunities for insurers

Against a backdrop of still attractive private market yields, improving capital markets, and supportive regulatory frameworks, UK and European insurers continue to refine private market allocations with a focus on income durability, capital efficiency, and liability alignment.

Private credit

We remain constructive on private credit (senior direct lending), as private equity deal activity continues to improve and longer holding periods support sustained demand for financing. Given its defensive characteristics, floating rate profile, and spread pickup versus public credit, private credit remains particularly attractive for insurance portfolios. 

Real estate and infrastructure debt are also compelling, with real estate debt benefiting from a stabilising equity market and high current income, while infrastructure debt is supported by long term secular tailwinds from digitalisation and the energy transition. Taken together, these strategies offer insurers attractive risk adjusted returns and strong returns on capital under the Solvency regime.

Private equity

We remain underweight private equity, reflecting its higher capital intensity and lower balance sheet efficiency relative to private credit. However, reopening capital markets and aging dry powder are driving faster deployment from the second half of 2025, supporting a more selective opportunity set across leveraged buyouts and growth strategies. 

Proposed amendments to Solvency II’s Long Term Equity (LTE) framework, expected by January 2027, may materially improve the capital efficiency of eligible equity exposures, supporting selective increases in core private equity allocations.

Real assets

We are modestly increasing exposure to real assets, particularly real estate and infrastructure, as valuations stabilise and transaction activity improves. 

• In real estate, an increasingly income led recovery favours core and core plus strategies with sustainable yields and resilient net operating income growth — an attractive profile in a slower growth, higher rate environment.
• Infrastructure remains a key strategic allocation for UK and European life insurers. It’s supported by secular tailwinds from digitalisation, data centre expansion, and power and transmission needs, delivering stable, long duration, often inflation linked cash flows aligned with annuity liabilities. 

From a Solvency perspective, infrastructure, real estate debt, and core property remain more capital efficient than equity, with LTE reforms potentially improving the treatment of eligible infrastructure equity.