Over the past few years, insurers have been moving deeper into private credit and alternative assets. It is not always obvious from the outside, but the scale is growing. Deals like American International Group partnering with CVC Capital Partners, or increased activity from firms such as Oaktree Capital Management, are part of a broader pattern.

Insurance capital is flowing into areas that used to be dominated by banks or specialised lenders. That raises a slightly uncomfortable question: are insurers still playing it safe, or are they quietly stepping into the world of shadow banking?

It’s not just about chasing yield

At first glance, it is easy to say insurers are just looking for better returns. Bond yields have been low for years. Naturally, they are exploring alternatives. But that explanation only tells part of the story.

According to Dr Jassem Alokla, Senior Lecturer in Finance at ARU, England, United Kingdom, the shift is being driven by a mix of factors rather than a single trigger.

“All three — opportunity, necessity, and competitive pressure are at work,” he told International Finance.

There is definitely an opportunity element. Private credit tends to offer higher spreads than public bonds, partly because these investments are less liquid and often more complex. For insurers willing to hold assets long-term, that premium is attractive. Still, the bigger issue is structural.

Life insurers, in particular, are always trying to match long-term liabilities, things like annuities, with assets that generate predictable cash flows. In a world where traditional bonds do not always deliver enough return, that becomes harder to do. So, they look elsewhere.

“Insurers aren’t just chasing yield. They’re trying to close an asset-liability mismatch problem,” Alokla explains.

There is also the fact that banks have pulled back from certain types of lending since the 2008 global financial crisis. That gap didn’t stay empty for long. Private credit funds stepped in, and insurers followed, often through partnerships with asset managers.

In a way, insurers did not just decide to enter private markets. The market shifted, and they adapted.

The shift is real, but not dramatic yet

It would be easy to assume insurers are rapidly abandoning bonds, but they are not. Traditional fixed income still dominates portfolios. Government bonds and investment-grade corporate debt remain the core. That has not changed overnight.

What has changed is the mix within that core. There is a gradual move away from purely public bonds toward private credit, infrastructure debt, and real estate lending. It is not always visible unless you look closely at portfolio breakdowns, but the direction is clear.

Alokla describes it as ‘material and rising’, but not something that overturns the whole system.

Derek Guo, Chief Legal Officer at MetLife China, sees it as even more measured.

“It is not a significant shift, but a very slight move. Life insurance is still focused on steady and long-term return,” he told International Finance.

That difference in tone is interesting. It shows how this trend isn’t being experienced in the same way everywhere. In some markets, it feels like a meaningful evolution. In others, it still looks like a small adjustment. The truth is probably somewhere in between.

So…is this shadow banking?

This is where things get a bit more complicated. If you look at what insurers are actually doing, lending to companies through private credit, structuring deals, working with asset managers, it starts to resemble activities traditionally associated with banks.

Or, more precisely, with what’s often called shadow banking. Alokla acknowledges that similarity, but with a caveat.

“Partly, in a functional sense. Their private-credit intermediation resembles shadow banking,” he says. But he’s careful not to overstate it.

Insurers don’t take deposits. They operate under strict solvency rules. They’re regulated very differently from banks and most non-bank lenders. While the activity may look similar, the framework around it isn’t the same.

Guo takes a firmer stance, especially from a Chinese perspective.

“I don’t think so. Insurance is a highly regulated industry, and capital invested in private credit is closely monitored with public disclosure,” he added.

He also points out that regulators impose limits on how much insurers can invest in these areas.

So, whether insurers are part of the shadow banking system depends on how you define it. If you focus on what they do, the comparison holds. If you focus on how they are regulated, it becomes less clear.

The risks aren’t always obvious

One of the challenges with private credit is that the risks don’t always show up immediately. Unlike publicly traded bonds, these assets aren’t priced every day. Valuations often rely on internal models. That can make portfolios look stable, even when underlying conditions are changing.

“Transparency is uneven. There is a real risk of valuation error,” Alokla said.

That does not mean insurers are ignoring risk. Many have built sophisticated systems to manage these exposures. But across the sector, the level of transparency and consistency can vary.

Liquidity is another issue. Private credit is not easy to sell quickly. In normal conditions, that is fine — insurers typically invest for the long term. But in stressed scenarios, it can become a constraint.

At the same time, the structures themselves are becoming more complex. As insurers go deeper into private markets, they are dealing with layered products, bespoke deals, and sometimes indirect exposure through funds.

Guo acknowledges that the risk profile is changing.

“This will definitely increase the risks for insurers,” he says, comparing it to traditional fixed income.

At the same time, he points to safeguards, limits on concentration, strict monitoring of assets, and regulatory disclosure requirements.

What happens when things go wrong?

The real question is not how private credit performs in good times. It is what happens when things go bad. If defaults rise or valuations fall, insurers could face pressure on their balance sheets. That might show up as lower capital ratios.

There is also the issue of liquidity. While insurers are not banks, they are not completely immune to stress. Higher-than-expected policy surrenders, or other cash needs, could force them to raise funds, possibly at unfavourable prices.

Alokla points to several possible transmission channels, valuation markdowns, liquidity strain, and broader financial linkages.

“Interconnectedness can amplify shocks,” he says.

Still, he emphasises that insurers generally have strong capital buffers. They are not starting from a weak position. Guo, speaking from a legal perspective, keeps it more straightforward.

“We have solvency ratios strictly monitored by regulators,” he added.

In other words, the system is designed to absorb stress, even if the risks are evolving.

What about policyholders?

For most people, the real concern is not how insurers invest. It is whether those investments could affect payouts, savings, or retirement products. The short answer is: not immediately.

If private credit investments underperform, the first impact is usually on insurers themselves, their earnings, their capital, and their margins.

Only in more extreme scenarios would it start to affect policyholders directly. Alokla explains that modern insurance frameworks are built with buffers.

“The risk is not zero, but protection is substantial,” he noted.

Still, as insurers take on more complex assets, the margin for error narrows. It becomes more important that risks are properly understood, and managed.

Regulators are watching, but still catching up

Regulators aren’t ignoring this shift. In fact, across different regions, there’s growing attention on private credit exposure, valuation practices, and systemic risk. But keeping up isn’t easy.

“Data and valuation gaps persist,” Alokla notes.

Private markets are, by definition, less transparent than public ones. That makes oversight more challenging. Guo, again, offers a more confident view from China.

“I think the regulator is closely monitoring liquidity and solvency. The current framework can guide investment strategy,” he added.

That difference highlights something important: regulation isn’t uniform. The risks, and how they’re managed, can vary significantly depending on the market.

Temporary shift or something bigger?

So, is this just a response to current conditions, or something more permanent? There’s no single answer.

Alokla leans toward a longer-term view. The combination of low yields, evolving liabilities, and growing private markets suggests this trend isn’t going away anytime soon. The role of insurers in credit markets is expanding, even if gradually.

Guo is more cautious.

Both views make sense. Market conditions clearly played a role in accelerating the shift. But once insurers build capabilities in private credit, and start relying on those returns, it’s not always easy to step back.

A quiet transformation

For now, insurers still look like what they have always been: stable, conservative, and heavily regulated. But underneath, things are moving. They are allocating more capital to private markets. They are partnering with asset managers. They are stepping into spaces once dominated by banks.

It’s not a dramatic transformation. There’s no sudden break from the past. But it is a shift, and one that could reshape how credit flows through the financial system.

Whether that makes insurers more resilient or introduces new risks is still an open question. What is clear is that the line between traditional insurance and shadow banking is no longer as sharp as it once was, and that is quietly becoming one of the more important changes in global finance.

The post Insurers develop appetite for risk, explore world beyond bonds appeared first on International Finance.

At the forefront of this client-centric approach is the firm’s Senior Vice President – Sales, Kapil Sharma, who brings over two decades of experience in financial advisory and wealth management to help clients achieve financial security and long-term prosperity. He specialises in personal protection, retirement strategies, estate planning, and cross-border wealth solutions.

Kapil’s expertise spans Business and Investment Solutions, including corporate insurance, portfolio bonds, property investments, and structured products, as well as Specialised Financial Solutions such as inheritance tax planning, group pension schemes, and UK pension transfers. He focuses on empowering individuals, families, and businesses to grow their wealth strategically, efficiently, and with lasting confidence.

In an exclusive interview with International Finance, Kapil Sharma, Senior VP – Sales at The Continental Group, shares his client-centric approach to wealth management, emphasising tailored strategies, risk management, sustainable investing, and technology-driven insights to balance short-term goals with long-term wealth preservation and legacy planning.

Can you walk me through your overall approach to wealth management and how you tailor it to meet individual financial goals?

My approach to wealth management is rooted in a deep understanding of each client’s unique financial landscape. I believe that wealth management is not merely about managing assets, but also managing aspirations. Every client’s journey is distinct, shaped by their life goals, values, and circumstances. My first step is always to listen and understand their priorities, tolerance for risk, and long-term vision, including their current provisions to meet their future financial goals.

Once this foundation is built, I design a tailored wealth strategy that aligns with both short-term liquidity needs and long-term capital preservation. I integrate traditional investment principles with modern financial analytics, ensuring that portfolios are both resilient and adaptable to changing market dynamics. The ultimate goal is to create enduring value, helping clients not just grow wealth, but preserve and transfer it across generations.

What is your process for evaluating a client’s current financial situation and understanding their long-term goals?

Evaluation begins with a comprehensive financial discovery session. I assess the client’s income sources, liabilities, existing investments, tax exposures and estate structures. This forms the baseline for the analysis. From there, I conduct a detailed goal-setting exercise to understand not just what clients want to achieve, but why those goals matter to them—whether it’s financial independence, legacy creation, or philanthropic impact.

This combination of quantitative assessment and qualitative understanding allows me to translate life goals into measurable financial milestones. Regular reviews and recalibrations ensure that our strategy evolves alongside changes in life circumstances, regulatory environments, and market conditions.

How do you determine the appropriate asset allocation and investment strategy for clients with varying risk tolerances?

Asset allocation is the cornerstone of a sound investment strategy. I use a structured, data-driven approach supported by risk-profiling tools that quantify a client’s capacity and willingness to take risk. Beyond metrics, I focus on emotional risk tolerance, which is their reaction to volatility or downturns.

Based on this insight, portfolios are diversified across asset classes, geographies and sectors. For conservative investors, I emphasise capital preservation through fixed income and defensive equities with dividend-paying instruments. For growth-oriented clients, I adopt a more dynamic approach incorporating thematic investments, alternative assets and tactical opportunities. Each allocation is designed to balance return potential with downside protection.

How do you stay updated on market trends, economic changes, and new investment opportunities that could affect a client’s portfolio?

Remaining ahead of market developments is central to delivering informed advice in the current world. I maintain a disciplined routine of reviewing global economic reports, monetary policy updates, and geopolitical trends, while also attending international investment forums to gain forward-looking insights.
My approach is built on staying informed, interpreting data in context, and translating insights into strategic action. Continuous learning and adaptability remain central to my practice because the ability to anticipate, rather than react, defines true advisory excellence.

What strategies do you use to manage the potential risks in a client’s portfolio, particularly in times of market volatility or economic downturns?

Risk management is an integral part of every portfolio design. I employ a multi-layered approach, starting with strategic diversification and periodic stress testing.

During periods of volatility, I focus on maintaining liquidity and avoiding emotional decision-making. My philosophy is to prepare clients for uncertainty, not react to it. I believe disciplined rebalancing and prudent cash allocation often prove more effective than drastic market timing. Protecting capital in downturns ensures clients remain positioned to capture recovery when markets stabilise.

How do you balance short-term financial goals like saving for a house or funding education with long-term goals like retirement or legacy planning?

Balancing multiple objectives requires a layered financial architecture. I segment wealth into distinct “buckets” based on time horizons such as short-, medium- and long-term. Each segment has a defined liquidity profile and risk exposure.

For short-term goals, I prioritise stability and accessibility through low-volatility instruments. Long-term objectives, such as retirement and legacy planning, are aligned with growth assets that compound value over time. This approach ensures that short-term needs are met without compromising the long-term compounding journey.

What is your approach to tax planning, and how do you ensure that a client’s portfolio is tax-efficient throughout different stages of life?

Tax efficiency is a silent driver of wealth accumulation. My approach integrates tax planning within every investment decision rather than treating it as a separate exercise. My emphasis is on designing structures that minimise liabilities through asset location strategies, optimised withdrawals, and efficient succession planning.

As clients progress through different life stages, I reassess the tax implications of changing income patterns, investment holdings, and estate considerations. A well-structured, tax-efficient portfolio enhances returns and also provides flexibility in wealth transfer and retirement planning.

How do you incorporate sustainable or socially responsible investing (SRI) strategies into a client’s portfolio?

Sustainable investing has become an imperative. Many clients, particularly in the GCC and Middle East, are increasingly conscious of aligning their wealth with purpose. I integrate ESG (Environmental, Social, and Governance) principles into portfolio construction by identifying financial plans and solutions that demonstrate strong ethical and sustainability practices. Responsible investing is, in my view, the future of wealth management.

What is your philosophy on balancing growth versus preservation of wealth, and how do you adjust that balance as clients age or change financial goals?

Wealth management is a dynamic process that evolves alongside life stages. In the accumulation phase, I prioritise growth through calculated exposure to equities and alternative investments. As clients move into preservation and distribution phases, the focus gradually shifts toward capital protection and income generation.

The balance between growth and preservation is continuously reviewed through life events such as retirement, inheritance, or business exits. Flexibility is key. Recalibrating strategies ensures that portfolios remain aligned with evolving objectives and risk profiles.

How do you handle market downturns or financial crises, and what steps do you take to protect clients’ assets during uncertain times?

In times of crisis, clarity and communication are paramount. My first step is to reassure clients through transparent discussions that explain market realities, and then reaffirm the long-term strategy. Panic-driven decisions can be more damaging than volatility itself.

I emphasise diversification, liquidity buffers, and quality holdings that can weather downturns. During crises, opportunities often emerge, and disciplined investors who stay the course are best positioned to benefit from recoveries. My role is to help clients navigate uncertainty with confidence and resilience.

What tools or technology do you use to analyse and manage client portfolios, and how do you ensure transparency in tracking performance?

At Continental, technology plays a key part in enhancing the teams’ and advisors’ capabilities to serve our clients efficiently and accurately. We use advanced portfolio management tools combined with real-time analytics, performance reporting, and risk metrics to enable clients with insight and tools that provide clear visibility into asset allocation, returns, and benchmarks at any given moment. Technology has elevated the client-advisor relationship from transactional to collaborative. We combine digital insights with human judgement to ensure that decisions remain both data-driven and personalised.

What advice would you give someone just starting out with wealth management to ensure long-term financial success?

Start early, stay disciplined, and think long term. The most powerful element in wealth creation is time, and consistency magnifies its effect. New investors should focus on building a diversified foundation, understanding their risk appetite, and avoiding impulsive decisions driven by short-term market movements.

Equally important is seeking professional guidance early on. A well-structured plan, reviewed regularly, can turn financial goals into tangible achievements. Wealth management should not be skewed to chasing returns. It’s about building security, legacy, and peace of mind over a lifetime.

The post Tax efficiency quietly builds wealth: The Continental Group’s Kapil Sharma appeared first on International Finance.

Diversification

Diversification is the practice of spreading investments across different asset classes, industries, and geographic regions to reduce the impact of any single investment’s poor performance on the overall portfolio. By diversifying, investors can mitigate risk without sacrificing potential returns. Asset allocation is a crucial component of diversification, as it determines the percentage of the portfolio allocated to different asset classes, such as stocks, bonds, real estate, and commodities.

Asset Allocation

Asset allocation is the process of deciding how to distribute investments among different asset classes based on factors like risk tolerance, investment horizon, and financial goals. Common asset classes include equities (stocks), fixed income (bonds), cash equivalents, and alternative investments (e.g., real estate, commodities). The optimal asset allocation varies for each investor and depends on their unique circumstances. A young investor with a long time horizon may have a higher allocation to stocks for growth potential, while a retiree may prioritise income generation and capital preservation with a higher allocation to bonds.

Risk Management

Managing risk is a fundamental aspect of portfolio management. While risk cannot be eliminated, it can be managed through various strategies. This includes diversification, as mentioned earlier, but also incorporating assets with low correlation to each other, using derivatives for hedging purposes, and implementing stop-loss orders to limit potential losses. Additionally, investors can adjust their portfolio’s risk profile by varying the allocation to different asset classes or by selecting investments with different risk-return profiles.

Active Management vs Passive Management

Portfolio managers can adopt either an active or passive approach to managing investments. Active management involves making frequent trades and attempting to outperform the market through research, analysis, and market timing. Passive management, on the other hand, aims to replicate the performance of a market index or specific asset class by investing in index funds or exchange-traded funds (ETFs). Each approach has its pros and cons, and the choice between active and passive management depends on factors like investment goals, time horizon, and risk tolerance.

Rebalancing

Over time, changes in asset prices and investment performance can cause a portfolio’s asset allocation to deviate from its target. Rebalancing involves periodically adjusting the portfolio back to its target allocation by buying or selling assets. This ensures that the portfolio remains aligned with the investor’s objectives and risk tolerance. Rebalancing can be done on a predetermined schedule (e.g., quarterly or annually) or triggered by specific thresholds (e.g., when an asset’s allocation deviates by a certain percentage).

Tax-Efficient Investing

Taxes can significantly impact investment returns, so it’s essential to consider tax implications when managing a portfolio. Tax-efficient investing involves strategies to minimise taxes on investment income and capital gains. This may include holding investments for the long term to qualify for lower capital gains tax rates, using tax-advantaged accounts like IRAs and 401(k)s, and strategically harvesting tax losses to offset capital gains. By implementing tax-efficient strategies, investors can enhance after-tax returns and compound wealth more effectively.

Dynamic Asset Allocation

Dynamic asset allocation involves actively adjusting the portfolio’s asset allocation in response to changing market conditions, economic trends, or valuation levels. This approach allows investors to capitalise on opportunities and mitigate risks as they arise. Dynamic asset allocation strategies may involve tilting the portfolio towards undervalued asset classes, defensive sectors, or alternative investments during periods of market uncertainty. However, it requires active monitoring and disciplined execution to be effective.

Portfolio management is a multifaceted discipline that requires careful planning, ongoing monitoring, and disciplined execution. By incorporating these seven strategies into your investment approach, you can build a robust portfolio that aligns with your financial goals, risk tolerance, and time horizon. Remember that there is no one-size-fits-all solution, so it’s essential to customise your portfolio management strategies to suit your circumstances and objectives.

The post Portfolio Management: Seven strategies to optimise your investments appeared first on International Finance.