Resilience through change: Agility for success

Hello, I'm Mark Erickson, Global Head of the Financial Institutions Group for BlackRock.

We’re pleased to present to you our 13^th Annual Global Insurance Report, ‘Resilience through change’

The 2024 investment landscape has been marked by significant macroeconomic and market volatility.

While global growth is slightly higher than last year’s forecast, it remains subdued compared to the pre-pandemic era.

Central banks are carefully approaching monetary policy normalization, increasing the prospect of prolonged higher than pre-Covid interest rates.

This rate environment is compounded by regulatory and political uncertainties amidst global elections and escalating geopolitical tensions.

We have surveyed 410 senior insurance professionals, across 32 markets representing approximately $27 trillion in assets.

The investment landscape is changing and we explore this in our first theme ‘shifting horizons’

Regulatory developments, and geopolitical tension and fragmentation are at the forefront of insurers minds, citing these as the top macro risks.

With 2024 being the biggest election year in history, this underscores the uncertainty surrounding future policymaking.

On the other hand, there is no global consensus on the market outlook.

Most insurers in EMEA and North America anticipate that central banks will engineer a soft-landing: inflation will ease, rates will begin to fall and the economy will gradually slow.

In APAC insurers predict there will be no landing, with core inflation and rates staying high, in Latin America the opinions are more mixed with greater numbers of those surveyed anticipating a hard landing.

For our second theme, we see insurers diversifying risk and income

Our survey showed that interest rate risk was considered the most serious market risk – all regions agreed on this.

Insurers are benefitting from higher interest rates and are leveraging this environment across both public fixed income and private markets.

Most surveyed plan to continue increasing their exposure to private markets, citing diversification and the relatively lower volatility of these investments.

The low-carbon transition is an important consideration for insurance companies: 99% of those surveyed have set some form of transition objective within their investment portfolio.

Our third theme, ‘Financing the infrastructure gap,’ describes one way that insurers are planning to achieve this common goal.

For those insurers planning to expand their low-carbon transition strategy, clean energy infrastructure was the top thematic area

Impact strategies and emerging market investments were also cited as asset classes where insurers expect to increase transition-related allocations.

More broadly, meeting portfolio climate targets was considered a key driver for allocating to private markets

In our fourth theme, ‘Streamlining the operating model,’ the highest-ranking strategic priorities for technological advancement were:

integrated asset allocation;

integrated asset and liability risk management

leveraging expanding data sets such as ESG, and

increasing analytics coverage and support for private credit assets.

These four responses collectively encapsulate the themes I have previously outlined with you.

An effective investment strategy requires scale, resources, and innovation.

According to 40% of survey respondents, having an investment partner who understands both their insurance business and operating model is fundamental for success.

The need to future-proof has been echoed in our discussions with insurance CIOs. Whether it be a strategy, a process, or a model, these all need to be flexible and agile to respond to our changing environment.

I’d like to thank those who participated in the survey and the senior leaders for sharing their expert opinions. We look forward to engaging with you on these key themes, and hope you find the report valuable.