Insurers signal change in investment mix amid market upheavals

About 79% of insurers plan to evaluate their long-term strategic asset allocation (SAA) and nearly half, or 48% will review risk appetite thresholds this year, according to an industry survey by global investment firm BlackRock.

More than half, or 60%, of the 370 insurance investors surveyed in 26 markets list inflation as their top concern, followed closely by asset price volatility (59%) and liquidity (58%), according to the Global Insurance Report. The investors represent about $US28 trillion ($43 trillion) in assets under management.

“The current investment landscape is a result of major upheaval over the past two years, and uncertainty is only expected to increase,” Global Head of Financial Institutions Group Charles Hatami said.

“The insurance clients with whom we partner understand that innovation at scale and a nimble approach will be critical to navigate the complexity ahead.”

About 87% plan to increase allocations to private investments over the next two years as part of portfolio diversification moves. This would represent a 3% average increase versus their current allocation.

They also plan to increase holdings of liquid assets, with 37% of respondents intending to allocate investments to cash assets and 31% to fixed income instruments.

The industry is also focusing more on environmental, social and governance (ESG) investing, according to the report.

More than two-thirds of respondents say they are either likely or very likely to implement broad ESG targets in their portfolios in the next 24 months.

Around 85% say they are either likely or very likely to commit to specific climate objectives for their portfolio and 62% see decision making related to sustainability as a major trend shaping their industry in the coming years.

“The right technologies and tools will be critical for insurers to ensure consistency across sustainability analytics, with applications including regulatory disclosure and reporting, through to evaluating investment allocations,” BlackRock says.