SEOUL, South Korea — With the current era of low interest rates likely to last several more years, insurers are adjusting their investment portfolios to include more investments outside of highly rated bonds that they have targeted traditionally.

Alternative investments include equities, real estate, emerging market bonds and other investments that traditionally have been deemed more risky than U.S. Treasury bonds and other top-rated investment instruments, a panel of experts said.

In carefully structured investment portfolios, alternative investments can help insurers achieve higher investment returns without significantly increasing their risks, they said.

But a former regulator warned that insurers should expect more regulatory scrutiny of alternative investment strategies as regulators seek to protect policyholders and ensure insurers are adequately capitalized.

They were speaking during a panel discussion at the International Insurance Society's annual seminar, which is being held in Seoul, South Korea, this week.

The subdued global economic growth during the past several years has led to historically low interest rates as governments have tried to stimulate growth, said Randy Brown, co-chief investment officer of asset management at Deutsche Asset & Wealth Management in New York.

This is causing problems for insurers, which traditionally have relied on investment income to generate a significant portion of their profits. And as older bonds mature and are replaced by bonds offering lower yields, property/casualty insurers will have to reduce their combined ratios by several points to remain profitable, which would be difficult for many insurers to achieve, he said.

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To increase investment yields on fixed-income portfolios, insurers have to consider taking on riskier investments, Mr. Brown said. In addition, they are looking at nonfixed-income investments, such as real estate and infrastructure investments and dividend-focused equities.

Equity investments can be a realistic alternative to bonds, said Mark E. Watson III, president and CEO of Argo International Holdings Ltd., a Pembroke, Bermuda-based property/casualty insurer.

During the past year, “there's been more volatility in interest rates than in stocks,” he said. “We have interest rates moving around rapidly based on macroeconomic data and, in some cases, we have the stock market reacting to what's happening in the bond market rather than the other way around.”

As a result, Argo has taken a dual approach to its investments; and while it retains a core portfolio of highly rated bonds, it also has a capital appreciation portfolio that emphasizes equity investments, Mr. Watson said. Over the past 12 months, Argo's equity portfolio has increased 30%.

The insurer also has adjusted its business to reflect lower interest rates, he said. Long-tail liability insurers traditionally have relied more on investment income as they hold their funds for longer periods than short-tail risks such as property.

“For the last few years, we've actually been shrinking the tail of our liabilities but writing more shorter-tail business knowing that interest rates were going to stay low,” Mr. Watson said.

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Samsung Life Insurance Co. also has been adjusting its strategy to reflect the low yield environment, said Sung-Hoon Koo, chief investment officer and senior vice president at the Seoul-based life insurer.

“A prolonged low interest rate environment is the biggest threat to Korean life insurers,” he said. “We are trying to be very proactive in terms of asset and liability management,” said Mr. Koo, speaking through an interpreter.

The insurer has two major portfolios: the core investment portfolio, which largely invests in low-risk fixed income investments in the domestic South Korean market, and a “satellite” portfolio, which includes investments in international markets and nontraditional asset classes, such as equities and real estate, he said.

As insurers move to diversify their investments, regulators are monitoring the changes, said James Wrynn, a senior partner at Goldberg Segalla L.L.P. and a former superintendent of insurance for New York.

“The first thing to remember is that regulators are there with you … but they are coming at it from a different perspective,” Mr. Wrynn said.

Regulators understand why insurers are adopting different investment strategies, but their first concern is to protect policyholders and to ensure that insurers remain solvent, Mr. Wrynn said.

“Most regulators would be happy if the industry is thriving. The problem is that trying to eke out extra yield in this environment potentially poses problems,” he said. “Is it worth going with higher risk investments that may not provide high enough yields to justify the risk?”