BlackRock Study: Global Insurers are Future-Proofing Portfolios Amidst Shifting Markets

NEW YORK–(BUSINESS WIRE)–Worldwide Insurers are refreshing their investment approaches this year amid rapidly changing market conditions, focusing 11th annual Global Insurance Report. The company surveyed 370 insurance investors in 26 markets, representing nearly $28 trillion in assets under management.

Charles Hatami, Global Head of BlackRock’s Financial Institutions Group, said: “The current investment landscape is the result of major upheaval over the past two years and uncertainty is expected to increase further. The insurance clients we work with understand that innovation at scale and a flexible approach are critical to managing the complexities ahead.”

Accelerated portfolio reviews to balance risk and liquidity

Seventy-nine percent of surveyed insurers plan to review their long-term strategic asset allocation (SAA), and nearly half (48%) will review risk appetite thresholds this year. Most insurers (60%) cited inflation as their top market concern, closely followed by asset price volatility (59%) and liquidity (58%). To further diversify their portfolios, most insurers (87%) plan to increase private asset allocations over the next two years, which would represent an average increase of 3% over their current allocation. Insurers also plan to increase allocations to liquid assets, suggesting a barbell approach, with 37% of respondents planning to invest in cash and 31% intending to invest in fixed income.

Lyenda Delp, BlackRock’s Head of Financial Institutions Group for the Americas, said: “Insurers still retain an appetite for risk assets, but as we transition from a long period of steady growth and inflation to a new regime of heightened macro and market volatility, their targets are more dynamic than the search for returns or general diversification. On a portfolio-wide basis, insurers are now reassessing the role each asset class must play in building resilience.”

Focused on an integrated approach to ESG and climate investing

More than two-thirds of survey respondents indicated that they are likely or very likely to implement comprehensive ESG goals in their portfolios in the next 24 months. Additionally, 85% said they are likely or very likely to commit to specific climate targets for their portfolio. 62 percent of the insurers surveyed see a major trend in decision-making related to sustainability that will shape their industry in the coming years. The right technologies and tools will be critical for insurers to ensure consistency across sustainability analysis, with applications ranging from regulatory disclosure and reporting to asset allocation evaluation.

Continuous innovation in risk management: from digital transformation to ETFs

65% of insurers identified digital transformation and technology as the top trend in the insurance industry over the next 12-24 months, compared to 44% in 2021. Almost all (98%) said they would use artificial intelligence, machine learning and prediction use analytics, blockchain or a combination of these technologies, with predictive analytics being used for both insurance business management (65%) and facility operations (72%). When it comes to future technology spending, the vast majority of insurers surveyed plan to prioritize investments for asset and liability management (68%), as well as regulatory compliance (54%) and market data (53%).

The surveyed insurers are also driving the introduction of new investment approaches such as bond ETFs. Insurers report planning to increase the use of fixed income ETFs in their portfolios, mainly to potentially improve liquidity (54%) and yield (48%). According to BlackRock research, eight of the top 10 US insurers are now reporting the use of bond ETFs, with five having launched them after volatile markets in March 2020.1 And so far this year, BlackRock has identified 17 insurers across Europe, the Middle East and Africa using ETFs for the first time.2 Given that fixed income ETFs are often viewed as efficient vehicles to generate return and income in a cost-effective and scalable way, BlackRock recently predicted that global bond ETF assets under management could reach $5 trillion by 20303 — and insurance investors are a key driver of this new approach.

About the BlackRock Global Insurance Survey

Now in its eleventh year, the BlackRock Global Insurance Survey provides industry-leading insight into the mindset and plans of the global insurance industry through independently conducted online and telephone interviews with senior insurance executives around the world. This year’s survey, conducted from June to July 2022, summarizes the views of 370 senior industry executives in 26 markets. Collectively, these companies represent approximately $28 trillion in investable assets. The accompanying interactive report complements the global results with regional results, commentary from industry peers and insights from BlackRock experts.

About BlackRock

BlackRock’s goal is to help more and more people achieve financial wellbeing. As a trustee for investors and a leader in financial technology, we help millions of people build savings that will serve them for a lifetime by making investing easier and more affordable. For more information about BlackRock, visit www.blackrock.com/corporate

1 S&P Global Intelligence, BlackRock analysis of filings with the National Association of Insurance Commissioners (NAIC) and the Securities and Exchange Commission as of April 2022.

2 BlackRock – New users are defined as investor allocation into ETFs in 2022 after at least 3 years of non-use.

3 BlackRock – Expected May 2022.

Important information

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