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Mark Erickson, Global Head of BlackRock's Financial Institutions Group, said, "We've seen rapidly accelerated demand for private markets among insurers in recent years, given these investments' dual benefits of diversification and increased income generation."

Navigating risk: finding the right investment partner

With 2024 projected to be the biggest election year in history, insurers see political uncertainty impacting macro risks, citing regulatory developments (68%) and rising geopolitical tension and fragmentation (61%) as their top concerns. Additionally, interest rate risk (69%) and liquidity risk (52%) were highlighted as the most serious market risks for insurers. Despite this outlook, 74% of insurers have no plans to change their current risk profiles. Notably, many insurers reported they benefit from partnerships to augment their internal expertise for risk evaluation as well as portfolio construction. According to 40% of survey respondents, an investment partner who understands both their insurance business and its operating model is fundamental to the success of insurers' strategic priorities.

Asset allocation: a balanced approach across public and private assets

Within public markets, 42% of those surveyed planned to increase allocations to government and agency bonds. Inflation-linked bonds are also a priority, with 33% planning to increase exposure, given nearly half of insurers (46%) identify inflation as a major macro risk. Additionally, 44% of respondents are looking to increase their allocations to cash and short-term instruments for liquidity.

In private markets, insurers report they are looking to increase allocations to private debt across multiple categories, including opportunistic private debt (41%), private placements (40%), direct lending (39%), and infrastructure debt (34%). As the scope of private debt has expanded to encompass a wider array of lending opportunities, BlackRock's report indicates this asset class can support insurance investment objectives for those needing long-term assets to support long-term liabilities, as well as increasing investment income through illiquidity rather than other investment characteristics. In addition, over half of insurers (52%) reported they will increase allocations to multi-alternative investments for greater flexibility and customization.

Olivier Van Eyseren, Head of the Financial Institutions Group, EMEA for BlackRock said, "Insurers face unique challenges when evaluating strategic asset allocation to alternative investments, including regulatory issues, liquidity needs, and higher capital charges. An important part of our work with insurance clients is helping them navigate these short-term complexities while working toward the best possible long-term portfolio outcomes."

Seizing the moment for clean energy infrastructure

Nearly all (99%) of insurers surveyed have set a low-carbon transition objective within their investment portfolio, with 57% of respondents citing management and/or mitigation of climate risks as a top motivation for doing so. Additional drivers for setting low-carbon transition objectives include responding to stakeholder and beneficiary interest and fulfilling regulatory requirements. 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. In addition, 66% of respondents stated that they have more conviction now towards investing in the low-carbon transition than they did one year ago.

Leveraging innovative technology

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.

The BlackRock Global Insurance Survey, now in its thirteenth year, was conducted in July - September 2024 and captures the views of 410 senior industry executives in 32 markets: 42% from EMEA, 29% from Asia-Pacific, 19% from North America, and 10% from Latin America.

Press release.

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