The majority of European insurers plan to increase their allocations to emerging market debt and emerging market equity funds over the next 12 to 24 months, according the latest Cerulli Edge―Global Edition. Demand for private assets is expected to continue, even if opportunities in the traditional fixed-income space increase due to interest-rate rises and inflation. Insurers’ responsible investing will focus on clean technology and renewable energy.

More than half of the insurers in the U.K., France, and Germany, plan to increase their allocations to both emerging market equity and emerging market debt over the next 12 months. For Europe overall, 53% expect to increase their allocations.

“Both emerging market equity and emerging market debt are set to see high levels of outsourcing, with insurers turning to third-party asset managers for new commitments in emerging market equities in particular,” says Justina Deveikyte, director, European Institutional Asset Management Research at Cerulli.

When it comes to responsible investing, clean technology and renewable energy are the themes that insurers in all but one of the six European countries (the U.K., France, Italy, Germany, Switzerland, and the Netherlands) will be targeting over the next two years. The only market where it will not be the top responsible investment theme is the U.K.; three-quarters insurers anticipate targeting climate change/carbon reduction.

Around half of the European insurers report on their exposure to energy transition and physical climate risk, as well as the carbon footprints of their investment portfolios. Biodiversity is a responsible investment theme gaining attention.

“European insurance companies are increasingly committing to net-zero strategies. Large insurers that were previously lagging are now signing up and the commitment is starting to filter down to tier-2 insurers,” says Deveikyte, noting that managers unable to implement net-zero targets are less likely to be considered for mandates.

Diversity and inclusion (23%) and housing/community development (27%) rank lowest among European insurers in terms of key responsible investment themes.