Adapt and thrive: Insurers seek opportunity in the changing world

Hello, I’m Charles Hatami, Global Head of BlackRock’s Financial Institutions Group and of the Financial Markets Advisory business.

I’m pleased to present to you our 11^th annual Global Insurance Report titled “Adapt and thrive: Insurers seek opportunity in the changing world.”

For this year’s report, we surveyed 370 insurers worldwide, representing $28 trillion in global assets under management.

I would like to thank everyone who participated.

Times have changed.

The pandemic and Russia’s invasion of Ukraine - a tragic humanitarian crisis - have impacted economies globally.

The war has pressured the price of food, fuels, and other commodities, when supply chains were already disrupted because of Covid.

Central banks have prioritized lowering inflation.

They have signaled their intent to continue to raise interest rates until there are signs that inflation is on the right course.

With rates rising, bond returns have been negative.

This is actually one of the worst years in recent history with bonds and stocks performance both being negative.

It’s no surprise that inflation, liquidity, and market volatility are the main concerns to emerge from our 2022 global insurance survey.

So what are insurers doing to address these challenges?

79% percent of our survey respondents plan to review their strategic asset allocation in response to the new world.

And despite all the turmoil, insurers intend to maintain their risk appetite.

But they also plan to look beyond their traditional asset mix and increase their exposure to private markets.

Beyond higher yields, they understand that private assets can provide diversification in more volatile markets, albeit with higher liquidity risk.

Fixed income products are likely to remain core components of insurers’ portfolios - now with ample opportunities to achieve higher yields.

We see many looking to increase exposure to areas such as high yield bonds. 

The decision of how to allocate capital across public and private assets is complex - and as I mentioned, liquidity will be a key consideration again.

Today, more insurers also recognize that technology and sustainability are driving change across the industry.

Two-thirds of respondents identified these as major accelerating trends, up from 45% last year.

85% of respondents say they are likely or very likely to commit to specific climate objectives in their portfolios within the next two years.

When it comes to technology, a majority of our survey respondents have adopted automation techniques and predictive analytics, including machine learning and artificial intelligence.

They are using these across both insurance and investment management - recognizing that technology is a key driver of transformation, growth and efficiency. 

What comes through clearly from this year’s survey is that insurers are evolving to succeed.

Many are already taking action, and risks remain for those who are slow to respond.

The world has changed.

It’s time to adapt and thrive.

I hope you enjoy reading the 2022 Global Insurance Report.