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GLOBAL INSURANCE REPORT 2021

Insurers embrace risk

As many economies make a strong restart following mass vaccinations and unparalleled financial stimulus from central banks, 362 senior insurance executives across the globe have shared with BlackRock their experiences and perspectives on the global insurance industry. Our interactive report charts key themes and global and regional implications.

Overview

We visualize each theme and its global and regional implications in our interactive report. The narrative is complimented by comments from your peers and thought-pieces by BlackRock experts.

GIR keypoints

Source: BlackRock Global Insurance Survey, June-July 2020. Base: Global (n = 360).

Insurers continue to navigate global risks and believe that several strategic trends will accelerate in the industry.

The ongoing low rate regime is pressuring margins and insurers continue to shift their investments to higher yielding assets in search for income.

Insurers are increasing their allocation to sustainable investments and integrating a sustainability lens into their investment processes.

Insurers are moving towards integrated, end-to-end investment platforms that cover the whole spectrum of asset classes and integrate climate risk into portfolio management.

Setting the scene

54% of respondents identify geo-political risk as the most serious macro risk to their investment strategy over the next two years. However, environmental risk is the fastest increasing trend, with 36% of respondents choosing it as one of their most serious macro risks this year – more than twice as many as in 2015.

Nearly half of the respondents see three current trends intensifying: the overhaul of insurance distribution models; the increased focus on sustainability; and the application of digital technology. Around a third of insurers expect M&A activity to accelerate in the industry.

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Accelerating structural trends

Q: What major strategic trends do you see accelerating in the insurance industry over the next 12-24 months?

Insurance industry trends outlook

BlackRock Global Insurance Survey, June-July 2021. Respondents selected up to three responses.

Diversification into non-core assets in search of income

60% of insurers expect to increase their appetite for investment risk over the next two years – the highest level since we started tracking this information in 2015.

Insurers are looking to reallocate out of core fixed income and into private assets, including higher-yielding fixed income, while compensating for the loss of liquidity through additional cash allocations.

As insurers increase their risk appetite, credit quality and increased liquidity needs remain key priorities. Insurers are increasingly looking to ETFs as effective tools for managing liquidity and enhancing yield.

Insurers are increasing their risk appetite

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

Investment risk estimates

BlackRock Global Insurance Survey, June-July 2021.

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Growing focus on sustainability

95% of respondents believe climate risk will have a significant or very significant impact on portfolio construction and strategic asset allocation over the next two years.

Insurers embed sustainability ever more deeply into their investment selection processes and expect to increase their allocation to sustainable investments by about 30% over the next two years.

Insurers see climate risk as investment risk

Q: To what extent would you expect climate risk to impact your portfolio construction and strategic asset allocation over the next two years?

Impact of climate risk on portfolio construction

BlackRock Global Insurance Survey, June-July 2021.

Accelerating advances in technology

Nearly 60% of insurers plan to increase their investment in technology over the coming years.

Insurance companies are quickly moving toward integrated, end-to-end investment platforms covering the whole spectrum of asset classes, from public to private, to enable integrated asset-liability management and multi-asset risk management.

In this year’s survey, insurers said they will use increases in technology spending to assist the move into alternatives and to integrate climate risk into portfolio management.

Technology as an enabler

Q: In the next two years, how do you anticipate changing your spending/investment in your technology and infrastructure (compared with 2020 spend)?

Anticipated technology and infrastructure investment

BlackRock Global Insurance Survey, June-July 2021.

Discover the Global Insurance Report 2021
Against the backdrop of an increasing risk appetite, global insurers share their views on growing allocations to non-core assets, their increased focus on sustainability and accelerating advances in technology.
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