BlackRock Study: Global Insurers Adapting to the New Market Regime
September 27 2023 - 3:00AM
Business Wire
- Two-thirds of insurers (60%) are readjusting strategic asset
allocation (SAA) with a focus on flexibility and new investment
opportunities
- 89% of insurers increasing allocations to private markets,
especially direct lending (60%)
- 62% of respondents see opportunity in clean energy
infrastructure
- Nearly half (47%) of insurers prioritizing technology
investments to manage investment and operational risk
Global insurers are adapting to a challenging macro environment
in 2023, according to BlackRock’s 12th annual Global Insurance
Report. To do so, they are adopting a strategic asset allocation
(SAA) that favors flexibility, allowing them to take advantage of
opportunities in public and private markets, and invest in the
transition to a low-carbon economy. The report includes findings
from 378 insurance investors surveyed across global markets,
representing nearly $29 trillion USD in assets under
management.
Charles Hatami, Global Head of BlackRock’s Financial and
Strategic Investors Group, said, “This year’s Global
Insurance Report comes in the second post-Covid year, amid five
structural mega forces affecting the macro outlook: the aging
population; the transition to a low-carbon economy; global
fragmentation; the changing roles of banks and non-bank financial
institutions; and digital disruption. These factors, coupled with
upcoming changes to insurance regulations and accounting regimes,
create new challenges and opportunities for Chief Investment
Officers and other investors.”
Embracing a new investment landscape
Inflation remains front of mind for insurers, with 71% of
respondents selecting it as the biggest economic surprise for the
second year in a row. Recession risk, chosen by 59%, was the most
selected macroeconomic concern. Over half of insurers (55%)
globally believe that further financial cracks are most likely to
occur in the banking sector, indicating concerns over the stability
and health of financial institutions – this rises to 77% for North
American respondents. In APAC, 55% of respondents cite concerns
over residential real estate.
Prioritizing flexibility and quality
In response, insurers are adopting an SAA that favors
flexibility. While insurers report their allocations overall will
remain similar to previous years, respondents show a bias for
quality within both public fixed income and private market
allocations.
Despite the yields now available in public markets, most
insurers (89%) plan to increase their exposure selectively to
private markets. Almost two-thirds (60%) of respondents expect to
increase allocations to direct lending, however, more than
one-third of respondents expect to reduce allocations to real
estate debt, real estate equity, and private equity. Public fixed
income will continue to be a core part of insurers’ SAA, with 92%
planning to maintain or increase their allocation. Within this,
over half of insurers (51%) plan to increase their allocations to
government bonds and agency debt.
Mark Erickson, Global Head of BlackRock’s Financial
Institutions Group, said, “Despite the challenge ahead for
insurers as they navigate the new investment landscape, responses
to our survey highlight the opportunities available in both public
and private markets. In order to take advantage of these, insurers
are considering a flexible investment approach and robust risk
management framework, enabled by technology.”
Investing in the transition to a low-carbon economy
Sustainability considerations are embedded in most insurers’
investment processes globally, with respondents now focused on
opportunities presented by the transition to a low-carbon economy.
Two-thirds of respondents (62%) globally expect the greatest
investment opportunity from this transition to be in clean energy
infrastructure, with the highest percentage from insurers in North
America (74%) compared to EMEA (62%), APAC (57%) and Latin America
(56%). Challenges with implementing sustainable investments remain,
however, with 54% of respondents citing market volatility as the
biggest hurdle.
Leveraging technology solutions
Against an increasingly volatile and complex macroeconomic and
regulatory backdrop, and with insurers growing their allocations to
private markets, nearly half of respondents (47%) globally cite
risk management as a driver of increased technology investments
over the next two years. In addition, 47% of insurers are
considering technology that increases operational efficiency and
reduces cost. Integration of climate risk (38%) and compliance with
regulatory and reporting requirements (45%) are also cited as
considerations for technology solutions. When asked where
technology can add value to their strategic asset allocation,
insurers report workflow automation (45%), liability integration
(42%), and modelling of alternatives in SAA (35%) as areas of
focus.
About the BlackRock Global Insurance Report
The BlackRock Global Insurance Report, now in its twelfth year,
provides industry-leading insight into the thinking and plans of
the global insurance industry through independently conducted
online and telephone interviews of senior insurance executives
across the globe. This year’s survey conducted in June-July 2023
encapsulates the views of 378 senior industry executives in 27
markets. Taken together these companies represent investable assets
of approximately US$29tn. The associated report complements the
global findings with regional results, comments from industry peers
and insights from BlackRock experts.
About BlackRock
BlackRock’s purpose is to help more and more people experience
financial well-being. As a fiduciary to investors and a leading
provider of financial technology, we help millions of people build
savings that serve them throughout their lives by making investing
easier and more affordable. For additional information on
BlackRock, please visit www.blackrock.com/corporate
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Media
EMEA
Emma Philips emma.phillips@blackrock.com +44 (20) 7743 2922
Nicole Jeary nicole.jeary@blackrock.com +44 (20) 3649 3469
US
Thomasin Bentley thomasin.bentley@blackrock.com (+1) 646 231
1769
Sachi Madan sachi.madan@blackrock.com (+1) 917 284 3790
APAC
Cecilia Ho cecilia.ho@blackrock.com +852 39032595
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