Global insurers keen to take on new investment risks

Global insurers keen to take on new investment risks | Insurance Business

Global insurers keen to take on new investment risks

Insurance companies are in a relatively upbeat mood and are ready to increase their risk exposure, a new study shows.

According to BlackRock, in its Searching for better returns survey, 47% of insurers surveyed plan to increase portfolio risk exposure over the next two years, compared to only 9% who planned to do so in 2017.

The study suggests insurers appear open-minded across all asset classes but with a growing interest in private markets investments and the China A market.

Additionally, it reveals insurers worldwide (83%), led by European insurers, are looking to integrate Environmental, Social and Governance (ESG) criteria in their investment process. Despite this, 70% of insurers reported a lack of in-house expertise to model ESG variables.

BlackRock head of insurance asset management business in Europe, the Middle East and Africa Patrick Liedtke highlighted that insurers worldwide still see increased investment returns as a key means to boost profitability.

“What is different this year, however, is the marked change in insurers’ willingness to take risk,” Liedtke said. “This is certainly an important shift reflecting a significant easing of concern around macroeconomic and market risk, despite continued geopolitical tension and a less positive outlook. Insurers recognize the need to cast the net wider – by investing across the entire fixed income spectrum, increasingly treating private markets as mainstream asset classes, especially private credit, and taking advantage of the opening up of Chinese markets.”

While there is increased focus in ESG, Liedtke added practical ESG obstacles remain and that having access to high-quality data is still a challenge requiring an industry-wide response.

BlackRock’s report was conducted in cooperation with the Economist Intelligence Unit (EIU). It surveyed 372 senior insurance executives, across 27 countries in the insurance and reinsurance sectors, representing estimated assets under management of US$7.8 trillion.