Persistently low yields have forced insurers to diversify their investments, but Australian groups have been slow to copy their counterparts in Europe and North America by investing abroad.

That’s the view of HSBC Global Head of Insurance Coverage Patrice Conxicoeur, who says insurers have not needed to look further afield because yields here still tend to be higher than elsewhere.

But he told insuranceNEWS.com.au last week that even Australian returns make it difficult to meet yield targets.

Insurers invest conservatively so they have funds available to pay claims, and they have traded off higher returns for the safety of government securities or high-quality investment-grade bonds issued by major companies.

Options for other types of investment in the Australian market are limited for large insurers, Mr Conxicoeur says.

“The reality is that outside very large or very mature markets, very few markets have the diversity that can provide for the needs of insurance companies.”

HSBC manages $US130 billion ($139.4 billion) for insurers globally, and Mr Conxicoeur says more of them are looking abroad as they search for yield.

“The intensity of conversations we are having these days has certainly increased.”

Investment in equities dropped significantly during the global financial crisis, but “in the past three years we have seen a measured return to equities on the back of attractive valuations, yields and the search for return”.

HSBC Australia Head of Global Asset Management Geoff Pidgeon says local insurers are interested in equities with low volatility and are looking at credit markets in the region.

“The Asian credit market currently provides a credit spread differential of 1-3%, depending on the credit rating of the security, and we are therefore seeing increased investment and interest from global insurers,” he told insuranceNEWS.com.au.

“Australian insurance companies have been slower to move away from domestic holdings. However, due to these premiums, interest in growing.”

Mr Pidgeon says investors underestimate the resilience of Asian bonds, which offer higher yields than G7 countries, “with far lower debt-to-GDP ratios and higher economic growth”.