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GLOBAL INSURANCE REPORT 2019

Results for Europe

BlackRock |Sep 20, 2019

Allocation intentions reflect positive sentiment and need
for resilience.

The eighth Global Insurance Report from BlackRock includes responses from 150 European-based senior executives on key topics in the insurance industry. Use the tabs below to navigate through the key insights.

Constructive about the cycle

Global insurers are broadly positive on the current investment environment, but with a degree of caution. At a regional level, we see, however, important nuances.

European insurers are optimistic about the current investment environment despite potential geo-political disruption. At the market level, interest rate risk is the primary concern – ahead of liquidity risk and market volatility.

How would you describe your current outlook?

European responses describing current outlook

Source: BlackRock Global Insurance Survey, July-August 2019. Responses from 150 participants in Europe.

What do you consider to be the main macro & market risks to your firm’s investment strategy over the next 12-24 months?

European responses outlining main macro and market risks

Source: BlackRock Global Insurance Survey, July-August 2019. Responses from 150 participants in Europe.

Seeking portfolio resilience

Global insurers still maintain or extend risk exposures, but tread more carefully relative to 2018. At a regional level, we see, however, important nuances.

This is the region most likely to retain its current risk exposure and the least likely to increase risk. At the same time, private markets represent all but one of the top four target allocations. This suggests a rotation towards higher returning asset classes, whilst being mindful of capital efficiency and portfolio resilience.

Over the next 12-24 months, how do you expect your firm’s appetite for investment risk to change?

European responses for changes in investment risk

Source: BlackRock Global Insurance Survey, July-August 2019. Responses from 150 participants in Europe.

In the next 12-24 months, how do you anticipate changing your allocations to each of the following asset classes?

European responses regarding asset allocation

Source: BlackRock Global Insurance Survey, July-August 2019. Responses from 150 participants in Europe. Shown on Y axis as % of respondents in sample responding increase or decrease. Note: Numbers, including net percentages, may not add up to 100 due to rounding.

Optimizing fixed income

Globally, we see asset allocation intentions for fixed income that are broadly in line with last year, favoring investment grade corporate bonds, followed by ESG bonds and securitized assets.

Europe-based insurers are the least likely to believe additional alpha can be generated in fixed income markets, which is reflected in a somewhat more conservative target asset allocation. Tapping into liquidity premiums and positioning for interest rate risk are seen as the most promising strategies for alpha generation.

In the next 12-24 months, how do you anticipate changing your allocations to each of the following asset classes?

European responses regarding asset allocation

Source: BlackRock Global Insurance Survey, July-August 2019. Responses from 150 participants in Europe. Shown on Y axis as % of respondents in sample responding increase or decrease. Note: Numbers may not add up to 100 due to rounding.

What do you believe to be the best way to achieve additional alpha?

European responses on achieving additional alpha

Source: BlackRock Global Insurance Survey, July-August 2019. Responses from 150 participants in Europe.

Integrating private markets

Insurers across all regions and business lines look to bolster their exposure to private markets, with an anticipated mean increase of 2% over the next three years. In terms of asset class allocations, we see differing regional priorities.

European insurers have relatively high private market exposures and indicate that they will seek to increase these further, despite concerns around liquidity. Private equity and commercial real estate equity remain the most likely destinations for increased allocations.

What is the current and expected percentage of your overall portfolio allocated to private markets, now and in 2022?

European responses for asset allocation to private market assets

Source: BlackRock Global Insurance Survey, July-August 2019. Responses from 150 participants in Europe. Shown as expected changes (%) within strategic asset allocation (SAA). Responses grouped by % range.

What are the top four factors driving and limiting private market allocations over the next
12-24 months?

European responses for factors and barriers driving allocation to private markets

Source: BlackRock Global Insurance Survey, July-August 2019. Responses from 150 participants in Europe.