The number of insurance companies around the world that are planning to increase their investment risk has surged over the last 12 months, according to a survey from the world’s largest asset manager.

In its latest Global Insurance Report, BlackRock found that 47% of the 372 senior insurance executives – based in 27 countries – it polled planned to increase portfolio risk exposure over the next one to two years.

This compared to just 9% who planned to do this in 2017.

BlackRock said: “In sharp contrast to 2017 findings, concerns about geopolitical and other macro risks have subsided in almost every case – suggesting that insurers are generally more sanguine about the macro environment.”

In the latest survey, 30% of respondents said geopolitical risk was a key concern, down from 71% a year before.

The asset allocation intentions of insurers, as gleaned in the study, were shown to span across all asset classes.

Alternatives remained attractive and there was high interest in all areas of private markets, as well as a desire for selective emerging markets investments, such as the China A market, BlackRock said.

ESG challenges

Patrick Liedtke, head of the firm’s insurance asset management business in Europe, the Middle East and Africa, expressed surprise regarding some of the survey’s findings on insurers’ environmental, social and corporate governance (ESG) work.

Insurers increased their focus on ESG during the past 12 months, BlackRock found, with 83% saying an ESG investment policy was either very important or extremely important to their companies. However, some insurers said they had struggled to develop in-house expertise in the field, and opinions differed regarding how to implement ESG into investment processes.

“While such developments are to be welcomed – particularly in Europe which is leading the way in implementing ESG policies – practical ESG obstacles remain,” Liedtke said.

Some 90% of respondents agreed in the survey that regulators should provide clarity in this area by defining ESG investments on a consistent basis globally.

Outsourcing on the rise

BlackRock also reported that some insurers were “choosing partial or complete outsourcing of asset management as an effective way to balance exposure with the need for cost control and operational efficiency”.

Around 35% of respondents outsourced management of their private market holdings fully, and another 52% did so partly, the survey found.

Reasons for doing this varied, but 67% of respondents suggested that insurers were reluctant to add to costs and dilute profitability by building in-house expertise in these assets, especially in Europe and Asia.

No comparable figures on outsourcing for the previous year were available.

Topics