THE BLACKROCK GLOBAL INSURANCE REPORT 2018

Searching for better returns

Nov 29, 2018
By BlackRock

Now in its seventh edition, the 2018 BlackRock Global Insurance Report summarizes the key findings gained from surveying 372 senior executives in the insurance and reinsurance industry across 27 countries. The findings from the survey undertaken on our behalf by the Economist Intelligence Unit during July-August 2018, are complemented by insights from 12 in-depth interviews with leading insurance investors. As well as assessing trends in investor sentiment and the outlook for investment strategy, the report explores how insurers increasingly take into account environmental, social and governance (ESG) considerations.

Key insights

Insurers worldwide see increased investment returns as a key tool to boost overall business profitability. First identified last year, this trend is now accompanied by a marked change in insurers’ willingness to take risk. Given the size of insurers’ investment portfolios globally, this is an important shift that will affect markets everywhere.

Growing appetite for risk exposure
Almost half (47%) of insurers surveyed plan to increase portfolio risk exposure over the next one to two years, compared to a low of 9% in 2017, and this across virtually all asset classes, with private markets increasingly viewed as mainstream.

This change in demand for risk is seen across all regions except Latin America, which remains relatively cautious compared to North America, Europe and Asia Pacific (APAC). For the second year in a row, the largest share of insurers in Latin America plan to maintain their current exposure (2018: 83%, 2017: 97%).

Less concern about macro and market risks
Geo-political developments and changing regulations stood out as critical macro risks and drivers of change for insurers in 2017. This year these concerns have abated with insurers considering a wider range of factors, with concerns about environmental risk increasing the most.

For Latin America, the most serious market risk is changing interest rates, which increased to 70% (from 37% in 2017). As for macro risks, 53% consider regulatory risk as the most serious.

Increased importance of ESG
The survey results and interviews highlight how quickly ESG is moving up insurers’ priorities list ― for instance, 83% view having an ESG investment policy as either very or extremely important. We explore this in great detail in our report.

In Latin America 50% of insurers believe in the importance of having an ESG investment policy, and only 20% believe it’s extremely important. Over half (57%) of insurers in LatAm plan to implement avoidance screening, a much higher proportion than in other regions.

Continued quest for investment efficiency
We see a continuing drive towards greater investment efficiency, particularly in relation to private market assets, with 98% outsourcing some, or all, of their allocations. Our in-depth interviews suggest insurers are also concerned about optimising their overall portfolios.

In LatAm 80% of insurers are more likely to outsource for the purpose of cost savings.

Download the findings

The seventh edition of the BlackRock Global Insurance report summarizes the results from the online and telephone survey the Economist Intelligence Unit conducted on our behalf during July-August 2018. It reflects the responses from 372 senior executives across 27 countries in the insurance and reinsurance sectors, representing estimated assets under management of US$7.8 trillion, with strong representation from Asia Pacific, EMEA and Latin and North America. These responses are complemented by insights gained through detailed telephone interviews with 12 senior executives from the sector.