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Insurance Companies Investing in Private Real Estate - August 2014

by Oliver Senchal

  • 12 Aug 2014
  • RE

Insurance companies are a major source of institutional investor capital due to their large portfolios and annual cash inflows. Most insurance policies create predictable and long-term liabilities for insurance companies, allowing them to invest in long-term and illiquid assets like real estate. Preqin’s Real Estate Online includes profiles for 327 insurance companies that are currently investing in the asset class, with the average allocation to private real estate standing at $2.2bn.

Despite only 34% of insurance companies being based in North America, a considerable 56% include the region within their geographic preferences. Forty-one percent of these investors are located in Europe, with 53% targeting the region for investments. Regarding investments in Asia, 32% of insurance companies include the region within their preferences, despite just 19% being based in the region.

In terms of overall allocations to real estate, 45% of insurance companies have less than $500mn invested in the asset class. Approximately 16% have real estate portfolios worth between $500-999mn, with 27% of insurance companies investing between $1bn-4.99bn. A sizeable 12% of insurance companies have allocated $5bn or more to the real estate asset class, demonstrating the ability and scope of such investors to create and maintain expansive real estate portfolios.

In terms of strategy preferences, insurance companies have a strong preference for value added vehicles, with 58% of firms stating an interest in this strategy, while 54% have exhibited an interest in core and opportunistic vehicles. Core-plus (39%), distressed (23%) and debt (35%) vehicles were the least utilized strategies for insurers.

One example of an insurance company planning to invest in private real estate in the next 12 months is HUK Coburg, based in Coburg, Germany. HUK Coberg is looking to invest €500-600mn in real estate in the next 12 months. It will look to target core office property in Europe and the US. The insurance company is considering investing via separately managed accounts, private real estate funds and club deals.

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