Kathmandu. Alternative investments have evolved from a specific strategy to an important component of insurance portfolios.
A new study by investment management technology provider Clearwater Analytics (CWAN) has shed light on this. According to the research report, these assets now account for about one-third of the total holdings of the U.S. insurance industry. It is estimated to be about $2.7 trillion. This is because insurance companies have moved away from a traditional investment approach.
The report, titled “Are ‘Alternatives’ Still Optional?” presents industry-wide NAIC data with analysis of nearly 400 Clearwater Analytics customers. This represents a total of $4.4 trillion. It has provided detailed information on the extent and speed of adoption of alternative investment in the insurance sector.
The study points to a permanent change in the insurance industry. “Assets previously thought to be non-traditional are now a structural feature of insurance portfolios,” the report said, adding that private debt, including privately held bonds and collateral debt, now account for the largest share of alternative stocks. ’
CWAN data also shows that legacy technology systems are struggling to handle the increasing complexity of these investments. They are taking three to five times longer than traditional properties.
Data from CWAN’s platform reflects uneven adoption rates in the market, highlighting significant differences in how insurers allocate options. The report also highlights how post-pandemic market changes have permanently impacted portfolio structures and investment preferences.
“This research shows that options are shifting from margins to the heart of insurance portfolios,” said Kirat Singh, president of risk and alternative assets at CWAN. Some are going up to 35 percent and others are going as high as 70-80 percent. The real challenge now is operations. Handling this complexity requires an open and scalable technology infrastructure. ’
The analysis is based on CWAN’s proprietary platform. That supports more than $10 trillion in global wealth. This has revealed a wide variation in the level of risk.
Some insurance companies hold only a small share of alternative insurance companies. Others make up more than half of their portfolios. Despite these differences, the findings confirm strong structural trends driven by diversification, stable returns and the pursuit of better alignment with liabilities.
