Research Hints at Falling Recession Fears

Despites rising geopolitical risks a study has found insurers remain positive about the short-term investment outlook and do not see a global recession coming before 2022.

FinTech firm Blackrock issued its eighth annual global survey which found that insurance companies are diversifying their asset mix to build resilience into their portfolios.

The survey, “Re-engineering for resilience”, surveyed 360 senior insurance executives, representing $16 trillion of industry assets. It found that 78% of insurers surveyed are positive about the current investment outlook and over half (56%) are not expecting a recession before 2022.

However, the survey highlights increased caution and a desire to strengthen portfolio resilience through greater diversification. This has led to continued interest in less correlated private market opportunities, with 60% of respondents planning to increase allocations to the asset class in the next three years.

Two thirds of insurers (67%) globally also say they are seeking to integrate sustainability considerations into their investment process compared to a year ago, with progress in this area particularly striking among Americas-based insurers. However, over three quarters of respondents still believe that integrating ESG entails compromising on other investment goals. While this data points to a continued focus on “avoid” rather than “advance” strategies, the interviews conducted as part of the research indicate that progress is being made by insurers in addressing both ESG risk and opportunity across the entire investment process.

Patrick Liedtke, Blackrock’s Head, Financial Institutions Group for Europe, Middle East and Africa, commented: “Although insurers remain broadly positive in their market outlook, building resilience into their investment portfolios is a top priority for the industry.”

“The continued demand for sustainable investment opportunities is indicative of a broader industry trend, but insurers still seem to have some concerns about the return trade-off and how best to embed ESG principles into a portfolio. In many ways, this is to be expected when dealing with a relatively new sector of the industry. Overall, it is encouraging to see signs of progress in an area that we see as critical in years to come.”

“Combined with a ‘whole portfolio’ mindset and full use of the investment toolkit, insurers can build portfolios that can provide positive societal impact, while being able to withstand what is likely to be a prolonged period of low or even negative yields with potential spikes in political and economic uncertainty.”