Third of insurers plan to increase portfolio risk

There’s growing pessimism among insurers about investment opportunities and an increasing interest in allocating to less liquid private assets, frequently with the assistance of third-party asset managers, according to the just-released Goldman Sachs Asset Management (GSAM) annual insurance survey.

“Insurers are concentrating on finding new investment opportunities, which are sparse because yields still remain at low levels, and insurers are not anticipating a meaningful increase in rates this year,” said Michael Siegel, GSAM’s global head of insurance asset management.

“Nonetheless, one-third of insurers globally intend to increase overall portfolio risk. Insurers believe equity asset classes will outperform credit assets and they are looking to increase allocations to less liquid, private asset classes.”

The GSAM report noted that EMEA and pan-Asian insurers demonstrated a stronger risk appetite compared with their peers in the Americas who, having demonstrated a strong risk appetite in prior years, are now comfortable with their risk levels and planning to maintain overall risk.

The report also found insurers singling out the pace of US economic growth as the greatest macroeconomic risk. CIOs and CFOs believe the dollar will continue to strengthen from a stronger economy and relatively higher interest rates. As yields moved lower in 2014 and central banks expanded quantitative easing programmes, insurers lowered their expectations on rates.