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.
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.
Insurers are planning to increase their private market exposure to diversify risk and income.
Insurers are looking at this thematic area as a way to expand their low-carbon transition investment strategy.
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.
Seizing the moment for clean energy infrastructure
To support their low-carbon transition strategy, clean energy infrastructure such as wind and solar (60%) and technologies such as batteries and energy storage (60%) were identified as the top two thematic areas that insurers plan to target.
A wide array of opportunities
Governments have traditionally built and maintained critical infrastructure, but with national debt tripling since the 1970s, it is unlikely they can fund it alone. At the same time, the maintenance and expansion of infrastructure is just one of many demands on companies’ resources relative to their ability to fund. 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
In an increasingly volatile and complex macroeconomic and regulatory environment, insurers recognize the importance of investing in technology. Integrated asset allocation (63%) and asset liability management (61%) were named as strategic priorities for their technology platforms. Regulatory capital integration (51%) was also cited as an area where technology could add value. As insurers look to continue their deployment into private markets, 53% of respondents view private asset modeling as an additional area to leverage technology.
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
