Given the low rates on fixed interest securities, and better yields from tangible assets, few expect the appetite for hard assets among underwriters to wane.
In a recent survey of about 120 insurance executives by Axa Investment Managers, three-quarters said low rates were a key challenge, while one-third said increasing their allocation to direct investments in concrete assets was a solution.
But as ever more insurers consider tangible assets to meet their promises, they risk rushing into, or being left with, poorer-quality investments.
Buyers must still be discerning, which is where an experienced asset manager can help. For example, research by Axa IM's Real Assets division (Axa IMRA) on European commercial property found that while Berlin has less than one year's worth of office space left – the driest since 1994 – at current take-up rates, Rome has nearly five years' worth.
Axa IMRA's research goes further, finding divergences of nearly four years between spare capacity in different regions of Paris. "As there are still substantial disparities between and within markets, a focus on micro-location is key to performance," Axa IMRA said.
Close to 40 underwriters use Axa IMRA to help them find the optimum assets, and last year they funnelled a further €3.9bn ($4.8bn) into it last year. The flexibility, versatility and addition of value that the department displayed, commensurate with its €76bn size, impressed the Insurance Asset Risk Awards judges.
The department spoke of benefits of "scale, deal sourcing capabilities through 13 offices, capacity to deliver on complex transactions, breadth of strategies, and investment track record" all as attractive to underwriters.
Axa IMRA recently supplemented its €5bn portfolio of infrastructure debt and equity with its first direct investment in UK infrastructure, spending £230m ($321m) buying into Agility Trains West from John Laing.
Axa IMRA also boasts being Europe's largest real estate investor, with €74bn of assets under management. Its scope ranges from Australian shopping centres, to German housing and to Spanish student accommodation.