Almost two-thirds of insurance companies are planning to make new private equity investments before the end of 2012, according to the latest Preqin research. “Insurance companies represent an important source of capital for the private equity industry, accounting for 9% of all capital invested in the asset class. Regulations such as Solvency II are likely to impact upon the level of exposure some of these investors will have to the asset class. However, over three-quarters of insurance companies have so far been unaffected by impending regulations and the majority of insurance companies will continue to allocate capital to private equity in order to meet their long-term investment objectives,” explains Emma Dineen, manager, Private Equity Investor Data.
The survey results show that despite impending Solvency II regulatory changes, the vast majority (79%) of insurance companies have not altered their levels of exposure to private equity. Moreover, nearly one-third (30%) of insurance companies are currently below their target allocations to the asset class, and 88% plan on maintaining or increasing their allocation to private equity over the longer term. According to the research 60% have over $250m allocated to private equity, while 60% of firms polled intend to make their next commitments to funds in 2012. Only a marginal 2% intend to invest in 2013 and 16% not before 2014, while 22% remain unsure on exact timings.
According to the research, small to mid-market buyout funds are viewed as the most attractive fund types, with 49% of respondents seeking to invest in these types of funds over the next 12 months. Some 46% of respondents are actively or opportunistically seeking co-investment opportunities alongside fund managers.
The results, say Preqin, are generally positive for fund managers coming to the crowded fundraising market with new vehicles, as 85% of insurance companies will consider forming some new GP relationships over the next 12 months. Also positive for fund managers is that 79% of insurance companies have not changed their exposure to private equity as a result of new regulations.
Looking regionally, some 51% of insurance companies view Europe as an attractive area for private equity investment even in the current economic climate, while 45% view North America as attractive, while 16% see Asia as appealing. Around 31% of insurance companies polled already invest in emerging markets, and a further 29% are reportedly considering the opportunity.