Insurers accelerate 'great pivot' to private markets as interest rates fall: Goldman Sachs

By Aidan Gregory

March 25 - (The Insurer) - Goldman Sachs Asset Management expects a rush of insurers in 2025 seeking to increase their investment allocations to alternatives, particularly private debt, as falling interest rates in response to cooling inflation drive a search for secure income.

According to the results of Goldman Sachs Asset Management’s 2025 global insurance survey, published on Tuesday, 58% of insurers plan to increase their allocation to private markets over the next 12 months, with private credit seen as a particularly attractive opportunity.

Sixty-one percent of insurers believe private credit will be the best-performing asset class in 2025, followed by U.S. equities (57%) and private equity (55%).

“There is a significant pivot to private markets, and within private markets private credit, and within private credit investment grade,” said Michael Siegel, global head of insurance asset management and liquidity solutions at Goldman Sachs Asset Management, during a roundtable last week. “It is unusual for us to see such a broad-based trend across life, property casualty, life and multi lines, across all the regions. That is why we have phrased it as the great pivot from public to private.”

The strong demand across private markets, which are illiquid but also promise higher returns than listed securities, is being fuelled by falling interest rates in developed economies amid cooling inflation.

Goldman Sachs Asset Management, which manages $460 billion on behalf of insurers, surveyed chief investment officers and chief financial officers who collectively represent more than $14 trillion of insurance industry assets at the companies they work for.

The survey also found that inflation continues to be the most pressing macroeconomic concern for insurers, with 52% of the survey respondents citing it as a significant risk to their investment portfolios, up from 42% in 2024.

U.S. President Donald Trump’s decision to impose trade tariffs on close U.S. trading partners such as Canada and the EU this month has sparked concern that the world’s largest economy could see a spike in inflation and an economic slowdown if the tariffs are left in place.

The past fortnight has seen a selloff of U.S. equities, with the S&P 500 entering correction territory, and a rotation into UK and European stocks.

For insurers, the volatility in capital markets and the tariffs has not yet led to a widespread shift in asset allocation decisions, according to Goldman Sachs Asset Management.

“Clearly everyone is watching the news to see what the U.S. administration is planning on doing. The views on economic activity have not changed. There is still a strongly held views that the U.S. economy will continue without a recession this year, and a view that inflation will be higher than what was expected at the beginning of the year.

“There are no significant changes at all in terms of asset allocation views,” added Siegel. “There is a desire to underwrite industries that may benefit or be affected by the tariffs. It hasn’t settled yet and nobody is taking any action in anticipation of that.”