How Fixed-Income Investing Is Evolving for European Insurers

by Bob Sharma, Gerry Anderson, Souheir Asba of AllianceBernstein, 6/17/26

The search for yield, diversification and capital-efficient income is driving change.

Powerful forces are reshaping insurance investment portfolios, ranging from lower forecast public-market returns through regulatory change to technological advances. At AB’s April 2026 Rethinking Insurance Forum, guest panelists Hartej Singh, Head of Public Credit, Pension Insurance Corporation, and Todd Isaac, Chief Investment & Treasury Officer, Hiscox, discussed key developments.

A Broader Definition of Core for Fixed Income

For insurers, fixed income remains the foundation of portfolio strategy. But while public markets have long provided unrivaled sourcing capacity and liquidity, the definition of “core” is widening. In a world of tighter spreads and stiffer competition in the insurance market, insurance investors can now access a much more diverse range of complex alternatives exposures, notably in select private credit segments and other specialist income sources.

But evolution doesn’t mean abandoning discipline. If anything, it places a greater premium on portfolio design as investors seek more resilient returns and income streams while improving diversification across sectors, structures and return sources. In fact, diversification potential has improved over time, as many private-asset exposures have been developed to better meet insurers’ asset-liability matching needs. For many insurers, the key to boosting capital efficiency is no longer whether to move beyond the traditional core, but how to do it selectively and with clear governance.

Private Assets Are Expanding, but Public Markets Still Matter

Private assets continue to attract strong interest from insurers, and for good reason. They offer incremental spread, better alignment with long-term liabilities and access to opportunities less available in public markets. Those attractions are particularly relevant for insurers’ balance sheets that need steady, predictable cash flows over extended periods.

But public markets still are—and should be—part of the fixed-income conversation. Public credit remains essential, not least because liquidity, collateral needs and regulatory requirements still matter enormously for insurers. Public markets also provide access to a broader and often timelier supply of issuance, which can be especially valuable when private-market opportunity sets narrow or become less economical. Just as important, public credit brings necessary diversification to insurers’ portfolios, complementing private assets rather than serving only as a tool for liquidity, regulatory compliance or timely sourcing.

In short, insurers don’t need to choose between public and private markets. In our view, the practical approach is to integrate them holistically, choosing the components from across both markets that are the best fit for a portfolio’s needs and attractive when viewed from an insurance-specific relative-value lens. Manager selection and investment-vehicle structure are key, especially at times of private-market stress when portfolio outcomes can diverge more sharply. It’s also critical to assess how sectors work together within the whole portfolio rather than viewing any one segment in isolation.

Regulatory Evolution May Support Better Diversification

Regulation remains one of the most powerful influences on insurance portfolio construction. Capital treatment, eligibility and matching adjustment rules shape not only what insurers buy, but how concentrated portfolios become. Recent reforms in Europe and the UK point to a more flexible direction of travel, particularly in areas such as securitized assets and the treatment of certain less-liquid exposures. That’s an encouraging development, because insurers increasingly need regulatory frameworks that address their evolving risk and return requirements.

Constructive reform doesn’t have to weaken prudent investing. It should mean calibrating rules in ways that reward diversification, recognize differences among business models and avoid steering large parts of the industry into the same narrow set of assets. A more iterative dialogue between regulators and market participants could help achieve that balance. If regulation becomes more risk sensitive and operationally consistent, we believe portfolios would likely be better equipped to deliver resilience for policyholders and more efficient capital deployment.

Technology Is Becoming a Core Investment Capability

Technology is also reshaping how fixed-income portfolios are built and managed. Credit markets are large, complex and highly data rich. The number of individual securities in a global opportunity set is often far beyond what a purely manual approach can evaluate efficiently. As a result, quantitative tools are becoming increasingly important in areas such as screening, relative-value analysis, portfolio optimization and security selection.

For insurers, this matters because improved data management and systematic approaches to investing hold the potential to support more repeatable decision-making and more consistency across market environments. With systematic fixed-income mandates becoming increasingly popular, the most effective model for traditional discretionary managers may be one that uses technology to sharpen choices, improve implementation and strengthen oversight while keeping portfolio decisions anchored in credit research, liability needs and balance-sheet context.

The Big Picture: A Broader Playbook for a More Demanding Era

European insurers are entering a phase in which public fixed income still does the heavy lifting—but in more varied ways. Broader opportunity sets, a better balance between public and private assets, more risk-sensitive regulation and stronger use of technology are all part of that shift. In our view, insurance investors who chase novelty for novelty’s sake won’t fare as well as those who build flexible, well-governed portfolios that can adapt as markets, liabilities and rules evolve. In fixed income, “core” is less likely to mean a static allocation. It’s shaping up to be an investment framework designed to deliver resilience, income and optionality.

The views expressed herein do not constitute research, investment advice or trade recommendations, do not necessarily represent the views of all AB portfolio-management teams and are subject to change over time.

Bob Sharma is a Senior Vice President, Managing Director and Global Head of Insurance Client Group for AB, where he is responsible for leading the insurance initiative globally.

Gerry Anderson is a Vice President and Portfolio Manager on AB’s Insurance Allocation and Strategy team.

Souheir Asba is a Vice President and a Portfolio Manager for Credit, overseeing AB’s investment-grade credit portfolios.

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