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Insurance Companies Investing in Private Equity – June 2012

by Madeleine Stretton

  • 19 Jun 2012
  • PE

Insurance companies continue to make up a significant portion of the private equity investor universe, with 325 such institutions actively investing in the private equity asset class. Preqin’s recent special report regarding insurance companies provides an in-depth analysis of this investor type and looks at insurance companies’ current appetite for the asset class and their future intentions for investing in private equity.

Regulations such as Solvency II pose a risk to European insurance companies and their ability to invest in the asset class going forward; however, 79% of insurance companies worldwide told us that they have not altered their exposure to private equity in light of recent regulatory changes. Furthermore, 60% anticipate that they will make new private equity commitments before the end of 2012, with a further 22% taking an opportunistic approach and likely to make new commitments should favorable opportunities arise. This is positive news for fund managers.

Geographically, almost half (45%) of insurance companies are based in North America, followed by 32% in Europe and the remaining 23% in Asia and Rest of World. In terms of their geographic focus, Europe was named by over half (51%) of insurance companies as presenting the most attractive private equity investment opportunities at present, despite the current sovereign debt crisis in the eurozone. Forty-five percent believe North America is presenting the best opportunities, while 16% named Asia.

In terms of fund types, 55% of insurance companies believe that small- to mid-market buyout funds are currently presenting attractive private equity opportunities, and nearly half (49%) said that they plan to target these fund types over the next 12 months. Growth and mezzanine funds are also considered as presenting attractive investment opportunities in the current financial climate, with 20% and 22% of insurance companies seeking to invest in these fund types over the next 12 months, respectively.

Encouragingly for fund managers on the road seeking fresh LP capital, 85% of insurance companies expect to form some new GP relationships over the next 12 months. Over half of these LPs (55%) expect to commit to a mix of both funds raised by their existing fund managers, as well as managers outside of their portfolio. It is evident that despite ongoing concerns regarding regulatory issues, as well as continued market volatility, insurance companies are likely to remain significant investors in the private equity asset class over the next 12 months, as well as the longer term. 

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