Insurers' investments prioritizing flexibility, emerging opportunities
BlackRock reports 62% of insurance investors feel the greatest opportunities will come from the transition to clean energy infrastructure.
In an effort to overcome macroeconomic challenges, around 60% of insurers are focusing strategic asset allocation on flexibility and new investment opportunities, according to a survey of global insurance investors by BlackRock, Inc.
“This year’s global insurance report comes in the second post-COVID year, amid five structural mega forces affecting the macro outlook: the aging population; the transition to a low-carbon economy; global fragmentation; the changing roles of banks and non-bank financial institutions; and digital disruption,” Charles Hatami, global head of BlackRock’s financial and strategic investors group, said in a release. These factors, coupled with upcoming changes to insurance regulations and accounting regimes, create new challenges and opportunities for chief investment officers and other investors.”
Further, 89% of insurers are increasing apportionments to private markets, with a strong focus on direct lending, while 62% of survey respondents see opportunity in clean energy infrastructure, BlackRock reported. Public fixed income will continue as a core part of insurers’ strategic investment plans, with 92% saying they are going to maintain or increase allocation in this area. More than half also plan to increase investments in government bonds and agency debt.
Additionally, 47% of insurers said they are prioritizing technology investments to manage investment and operational risk. BlackRock reported that 62% of respondents feel the greatest investment opportunities will come from the transition to clean energy infrastructure.
“Despite the challenge ahead for insurers as they navigate the new investment landscape, responses to our survey highlight the opportunities available in both public and private markets,” Mark Erickson, global head of BlackRock’s financial institutions group, said in a release. “In order to take advantage of these, insurers are considering a flexible investment approach and robust risk management framework, enabled by technology.”
When it comes to technology, 47% of respondents said risk management demands will be a big driver of technology investments in the coming two years, while the same amount (47%) are seeking technology that increases operational efficiency and slashes costs.
Looking at where technology can be best applied to improve strategic asset allocation plans, 45% of insurance companies said in workflow automation, while 42% said liability integration and 35% said modeling of alternative allocation plans.
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