The global insurance report of the financial asset management company Blackrock, which was conducted among 370 senior managers of the insurance companies, reveals that inflation is indeed defined as the main risk, but 2 out of 3 managers in the industry believe that it will stabilize by the end of 2022. The report also shows that one in five plans to increase the risk in investments.
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However, the senior executives who manage $28 trillion (over two-thirds of the insurance industry), still define inflation as the main risk – 63% of them indicate inflation as the main macro risk for their investment strategy in the 12-24 month range, compared to only 24% of them a year ago.
The biggest fear of a recession
The risk that the interest rate hike brings with it to halt growth to the point of recession, becomes the second threat to the investment strategy: 50% of the respondents defined the recession as a significant risk, while the rising interest rate environment is ranked as the third most important threat, according to 39% of the respondents.
Senior executives of insurance companies around the world give relatively low weight to geopolitical risk: only 28% of managers in the field define the conflict in Ukraine as a major risk, compared to 54% last year.
Reduce exposure to real estate
The negative returns in the capital markets around the world certainly did not make the managers of the global insurance companies sleep well at night. But it seems that since these are long-term investments, most of them believe in the path they chose before the turbulent period. Although 79% responded that they agree with the statement that they need to carry out a strategic review of their asset allocation, 68% of all the managers who participated in the survey by Blackrock, whose branch in Israel is managed by Anat Levin, stated that they plan to maintain the existing risk profile. This is when 19% stated that they plan to increase the level of risk and 13% plan to go into the defensive and lower risk levels.
Where will the insurance companies direct their investment portfolios? 41% of respondents stated that they would increase exposure to derivatives and hedging instruments in the 12-24 month range compared to 50% who would maintain the existing allocation in the field. 37% stated that they would increase exposure to cash and short-term instruments (51% would maintain the allocation).
As for investment goals, 54% of the respondents said they would increase allocation in the field of commodities in the range of this year to the next two years. Only 29% intend to increase exposure to stock markets in developed countries and only 21% will increase exposure to crypto. A relatively high proportion of respondents will choose to reduce exposure to the real estate industry.
Anna Kazan, head of Blackrock’s financial institutions group in Europe, the Middle East and Asia, explained that “as we move from a long period of stable growth and inflation to the new regime of increased macro and market volatility, companies’ goals need to be more dynamic than the search for yield or general investment diversification “.