For euro area insurers this share is somewhat smaller, at around 40%, but it has increased by more than 5 percentage points over the last five years. Insurers have also been venturing into alternative asset classes such as alternative, infrastructure and private equity funds, loans and real estate holdings.
Their exposure to these assets has reached almost 10% of total investment and is expected to rise further.14 As some of these assets are highly illiquid, the portfolio shift towards these assets may also increase insurers’ liquidity risk beyond credit risk. But this is only one example, where the credit risk on non-banks’ balance sheets is coupled with liquidity risk.