The amount of insurance companies looking to increase risk exposure has shot upwards, with China A shares and private capital among the asset classes they want.
BlackRock found 47% of insurers across 27 countries planned to increase portfolio risk exposure over the next one to two years, compared to just 9% in a 2017 survey.
Patrick M. Liedtke, a regional head of BlackRock’s insurance asset management business, 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.”
The firms surveyed were interested in the entire fixed income spectrum, were increasingly treating private markets – particularly private credit – as mainstream asset classes, and taking advantage of Chinese markets now they are more open to foreign investment.
BlackRock’s ‘Searching for better returns’ survey got responses from 372 senior insurance executives controlling assets of around $7.8 trillion.
Environmental, social and governance (ESG) investing was of increasing relevance across the insurance sector – particularly in Europe – the survey also found, with 83% of insurers indicating the importance of ESG investment policies to their firm.
Yet 70% of insurers reported a lack of in-house expertise to model ESG variables and even experienced ESG investors struggle to integrate ESG at the overall portfolio level. Liedtke said access to high-quality ESG data was a challenge and requires an industry-wide response.
Other survey findings included:
• Reduced concerns about geo-political and other macro-risks
• Sharp decline in concern for most other market risks (liquidity, asset price correction and interest-rate risk)
• The exception was credit risk due to concerns the credit cycle is becoming extended.
• Less concern about regulations
Increase concern about environmental risks (21% now vs. 6% in 2017).
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