Goldman Sachs Asset Management’s (GSAM) annual insurance survey has found the most pessimism among insurers in four years as they struggle to identify attractive investment opportunities.
Michael Siegel, GSAM’s global head of insurance asset management, said "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."
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He added: "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."
In terms of the operating environment, the survey said US life insurers began the year well-capitalized with strong balance sheets resulting from favourable equity and credit markets throughout 2014.
It added that Pan Asian insurers are experiencing strong premium growth.
Over in Europe, the survey noted that life insurers are facing a more difficult environment with low to negative interest rates in addition to preparing for implementation of Solvency II, which will go into effect on 1 January 2016.
The survey said that given a 16 year transition period to fully implement certain components of the directive, the impact on European insurers is not expected to be severe.
The global online survey received 267 responses, including 208 CIOs, 48 CFOs and 11 individuals who serve as both CIO and CFO.
The global respondent base included life, property and casualty, multi-line, reinsurance, and health insurers.
Other key findings in the survey included:
- Insurers globally intend to increase allocations to less liquid, private assets. They intend to increase allocations to commercial mortgage loans, infrastructure debt, private equity and middle market loans.
- Consistent with their return expectations, insurers intend to decrease allocations to highly liquid assets such as cash and short-term instruments and government and agency debt
- Despite years of unprecedented global monetary easing, insurers have become more concerned about deflation in the near term due to slow global growth and lower commodity prices.
- Insurers anticipate commodities will be amongst the lowest returning asset classes this year. Insurers have pushed out their concerns regarding inflation to the medium term.
