Clearwater Analytics has released industry research revealing that alternative investments have fundamentally transformed from a fringe strategy to a portfolio cornerstone, now comprising nearly one-third of the US insurance industry’s assets – representing approximately USD2.7 trillion – as insurers abandon traditional portfolio strategies.
The firm writes that similar structural shifts are also emerging across the UK and continental Europe as insurers pursue diversification, yield and liability-matching under Solvency II and evolving capital rules.
The report, “Are ‘Alternatives’ Still Alternative?”, combines industry-wide NAIC data with analysis of approximately 400 CWAN insurers representing USD4.4 trillion in combined assets, including UK and European insurers on the CWAN platform, providing granular insight into alternative investment adoption patterns across the insurance sector.
CWAN’s key data findings challenge industry conventional wisdom, the firm says:
“Alternatives” classification requires redefinition: What was once considered a fringe strategy now represents approximately USD2.7 trillion (or nearly a third) of all insurance industry assets, marking a permanent, structural shift rather than a cyclical trend.
Private Credit Dominates Alternative Allocations: The report reveals which specific alternative asset classes have gained the most traction, with private credit assets—including privately placed bonds and mortgage loans—leading the charge.
Technology infrastructure crisis emerges: Legacy systems are failing to keep pace with alternative asset growth, with CWAN data showing three to five times longer processing times for alternative asset operations.
Platform data reveals allocation disparities: CWAN’s proprietary database shows significant variation in alternative adoption, with detailed breakdowns available in the full report.
Post-pandemic structural changes: The report analyses which pandemic-era trends became permanent fixtures and identifies emerging patterns that will shape the next decade of insurance investing.
“What this research shows is that alternatives have moved from the periphery to the core of insurance portfolios, they’ve already won,” says Kirat Singh, President, Risk and Alternative Assets, CWAN. “What we’re seeing with our clients is leading insurance companies shifting capital to privates and alts, some at 35 per cent while others going as high as 70-80 per cent. The real challenge now is operational, and having an open, scalable technology infrastructure becomes essential to handle this complexity.”
The research combines industry-aggregated NAIC data with CWAN’s proprietary database, which processes over USD10 trillion in global assets, revealing allocation patterns and operational challenges that smaller datasets cannot detect. The study found wide variation among individual insurers—with exposure to alternatives ranging from the low single digits to well over half of some portfolios—but identified upward, structural trends driven by the need for diversification, predictable yields, and liability matching.
Implications for the investment industry
The firm writes that the findings suggest that traditional portfolio construction models require fundamental revision, having profound implications for asset managers, consultants, and institutional investors across all sectors.
“This research represents one of the most comprehensive analyses of alternative investment adoption in the insurance industry,” says Matthew Vegari, Head of Research at CWAN. “By combining industry-wide NAIC data with analysis of our USD4.4 trillion client database, we’re seeing patterns that smaller datasets simply cannot reveal, including a technology infrastructure gap that threatens operational stability. Institutional investors are embracing newer asset classes that legacy systems simply can’t handle to any meaningful degree. Allocators need to see their investments in one place, on one system, especially in today’s risk environment. CWAN delivers just that.”
