Despite regulations insurers bullish on alternatives

GPs on the fundraising trail will be relieved to hear that insurers are expecting to up their private equity commitments, despite the threat of strict capital buffer rules under Solvency II, which will impact larger insurers with any EU business.

The private equity industry has long feared Solvency II will price many insurers out of allocating capital to the asset class, as it requires them to set aside €49 for every €100 invested under a default risk model.

But according to a survey from Goldman Sachs Asset Management 28 percent of 233 global insurers surveyed intend to increase their investment in private equity. Insurers also aim to increase allocations to infrastructure debt (29 percent) and real estate equity (26 percent).

Interest in private equity was strongest in the Americas, where 38 percent of insurers plan to increase allocations, compared to 22 percent and 13 percent of insurers in Pan Asia and EMEA, respectively.

The survey said the limited interest in Europe may be related to Solvency II but 72 percent of European insurers said regulations will have little or a moderate impact on their investment decisions.

Earlier this week Paris-based Ardian said it attracted more insurance companies than expected for its latest fundraise. “We thought that due to Solvency II regulations we would have less insurance companies in the fund, but because we demonstrated that the returns were there for the previous funds and the cash-in cash out curve was quite quick, we convinced a lot of them,” said Dominique Gaillard, a managing partner and head of direct funds at the firm.

However, not all insurers have such an optimistic outlook. Aktia Life Insurance previously told PEI's Research & Analytics division that Solvency II was the sole reason why it will not make any more private equity investments.

Another insurer, Groupama, sold Groupama Private Equity to fund of funds ACG Group last year, as part of an effort to sell assets not central to its insurance business.

And Lexington has bought many of Generali’s private equity fund interests, including Candover 2005, Cognetas Fund II, and Ironbridge Fund II, according to PEI's Research & Analytics division, as Generali looked to reduce its private equity exposure as a result of Solvency II.

Solvency II, which was originally scheduled to go live in January 2014, is expected to take effect from January 2016.