GLOBAL INSURANCE REPORT 2024

Resilience through change: Agility for success

15/okt/2024
  • BlackRock

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

We’re pleased to present to you our 13th 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.

The 2024 investment landscape has been marked by significant macroeconomic and market volatility. For our 13th Global Insurance Report, BlackRock surveyed 410 insurers globally to identify key themes that are at the forefront of insurers minds.

Introduction

Although global growth is slightly higher than last year’s forecast, it remains subdued compared with the pre-pandemic era. With many inflation indicators slowing, central banks are cautiously approaching monetary policy normalization, while carefully monitoring the risk of persistent, structural inflation. In our view, this rate environment is compounded by regulatory and political uncertainties amidst global elections and escalating geopolitical tensions.

In this year’s report, we identify four key themes that are capturing the global attention of insurers: (1) Shifting horizons(2) Diversifying risk and income(3) Financing the infrastructure gap; and (4) Streamlining the operating model.

 

Shifting horizons

In this year’s survey, insurers identified regulatory developments (68%) and geopolitical tension and fragmentation (61%) as top macro risks. With 2024 being the biggest election year in history, these concerns underscore the uncertainty surrounding future policymaking.

Conversely, there is no global consensus on the market outlook. A significant majority, 86% of respondents from EMEA and 87% from North America, anticipate that central banks will engineer a soft landing. As inflation eases, they expect rates to begin falling, leading to a gradual economic slowdown.

In Asia Pacific, 76% of respondents do not anticipate a landing, expecting rates and inflation to remain high and the economy to stay resilient. In Latin America, opinions are mixed, with a higher percentage (18%) expecting a hard landing relative to other regions. 

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Within developed market economies, which is the most likely scenario over the next year?

All percentages are rounded to the nearest whole number and may not add up to 100%

Diversifying risk and income

Respondents identified Interest rate risk (69%) and liquidity risk 52%) as their most serious market risks. With global interest rates higher than they were three years ago, investment yields for portfolios have improved and insurers are taking advantage of this environment by leveraging opportunities in both public and private markets.

91%
intend to increase allocations to private markets

Insurers are planning to increase their private market exposure to diversify risk and income.

60%
plan to target clean energy infrastructure

Insurers are looking at this thematic area as a way to expand their low-carbon transition investment strategy.

53%
name private asset modeling as a value-add to their technology platform

Insurers recognize the importance of investing in technology.

Financing the infrastructure gap

The low-carbon transition is an important consideration for insurance companies, with 99% of those surveyed setting some sort of transition objective within their investment portfolios.

A focus on infrastructure

Among organizations planning to increase allocations to transition-related investments, impact strategies, infrastructure, and emerging market investments are the most favored approaches. Thematically, clean energy infrastructure and transition technologies are the preferred target areas.

A wide array of opportunities

Governments have traditionally built and maintained infrastructure, but with national debt tripling since the 1970s, it’s unlikely they can fund it alone. Meanwhile, for companies worldwide, infrastructure is just one of many demands on their resources and is often neglected as a business consideration. This financing gap is creating new opportunities for insurers to invest in infrastructure across a wide range of investment options and sectors.

Streamlining the operating model

According to survey respondents, the highest priorities for investment management are integrated asset allocation (Strategic Asset Allocation ‘SAA’ / Tactical Asset Allocation ‘TAA’) solutions and processes (63%), integrated Asset and Liability Management ‘ALM’ (61%), and increasing the analytics coverage and support for private credit assets (55%).

Additionally, private asset modelling in a multi-asset portfolio (53%), inflation protection in a fixed income portfolio / inflation risk monitoring (53%), and regulatory capital integration (51%) were identified as the top three areas where technology can add the most value.

BlackRock’s Global Insurance Report 2024

Insurers were faced with economic challenges in 2024. BlackRock’s 13th annual Global Insurance Report offers insights from 410 industry executives, detailing their views on current market conditions and strategies for navigating the evolving investment landscape.
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