Portfolio Allocations of Insurance Companies: An Exploration of Investment Decision-Making Techniques for Both Mixed- Asset and Real Estate Portfolios
#166, List of Publications, Center for Real Estate and Urban Economic Studies, University of Connecticut
Posted: 7 Jul 1998
Date Written: March 1996
This study explores the use of real estate in investment portfolios of large property/casualty and life insurance companies in the U.S. While the theory of real estate asset allocation has been explored in the literature, the examination of actual practices of portfolio managers is not well understood. The need for research into asset allocation of large pools of funds such as those held by insurers is evidenced by the findings of some researchers that have shown that many portfolios contain an inadequate level of real estate in their total investment holdings. At the end of 1992, the insurance industry held $2.4 trillion in investment funds, and the property/casualty sector of the insurance industry accounted for $637 billion of those assets. Consequently, prudent asset allocation by insurers is a significant issue in the financial community. This study reports information on the basic decision-making criteria of portfolio managers with property/casualty and life insurers, and will examine the insurers' asset holdings. Results help reveal how actual real estate asset allocation decisions are made by insurers.
JEL Classification: G22
Suggested Citation: Suggested Citation