We are seeing an insurance renaissance – AllianceBernstein deputy CIO of insurance Gary Zhu

Innovation on the liability side is allowing insurance companies to change their funding costs and be more competitive, says Gary Zhu, deputy chief investment officer of insurance at AllianceBernstein (AB), in the latest episode of ‘Credit Exchange with Lisa Lee’.

Zhu discusses the proliferation of insurance capital into private assets. He explains that dynamic has to do with lengthening lifespans and a declining lapse rate, the percentage of policies that don’t renew, which has allowed insurance firms more flexibility on liquidity.

“They can deploy that capital into private assets, and earn that incremental spread, without giving up anything that they needed,” he says.

On the recent stock market volatility, Zhu says that staying invested during good times and bad is important for equity investors in general. On investing, AB’s insurance silo, which has around $200bn in AUM, has been overweight allocations to residential housing credit.

“We like the housing market in the US,” he says. “So [the] residential credit market seems to be a place that people have underappreciated the value in the housing markets.”