Bonds account for the largest part of the investments of insurers. Life and composite insurers tend to invest the most in fixed-income securities to match their long-term liabilities and to have a stable and regular source of income. Non-life insurers also invested most of their assets in bonds, around 50% among 48 reporting jurisdictions. The asset allocation of insurers can, however, vary widely across jurisdictions.1 Insurers usually favour government bonds over corporate bonds, with some exceptions. For example, the majority of the life and health industry's bond portfolio in the United States is comprised of industrial and miscellaneous bonds. In Chinese Taipei, insurers also invest largely in corporate and financial sector bonds, available in high volumes and with a long-term horizon.
While equities account for a lower proportion of the investments of insurers, insurers in some countries still invest a significant share of assets in equities. Those with the highest proportion of assets in equities include life insurers in Denmark, Lithuania and Sweden and non-life insurers in Austria, Croatia, Iceland, Sweden and the United States, where equities accounted for more than 25% of investments.
All insurers also held a portion of their assets in cash and deposits, which are liquid assets. Non-life insurers especially need liquid instruments to meet claims requests. Liquid instruments could also be useful for insurers facing policy surrenders or holding derivatives, as they may be able to pay customers or post collaterals in a short period of time. Deposits may have been able to provide higher returns in 2022 in a context of rising interest rates, and insurers seized this opportunity in Colombia, Czechia, Ireland for example.
Insurers also invest in other instruments than cash, bonds and equities (sometimes called alternative investments). In Belgium, where investments in these instruments accounted for between 25% (for non-life insurers) and 40% of assets (for life insurers) at end-2022, the investment portfolios of insurers still reflected the search for yields of the previous years when insurers were looking for higher yielding and less liquid assets in a low interest rate environment, according to the insurance supervisor.