Insurance companies are tentative about investment opportunities and recognize the need to enhance portfolio returns in order to combat the low-yield environment, according to the annual Goldman Sachs Asset Management Insurance Survey.
The majority of the insurance company chief investment officers surveyed globally believe the investment environment is staying the same or improving, with 25% indicating the investment environment is improving and 33% indicating it is staying the same. The remaining 42% believe the investment environment is getting worse, compared to 43% in 2013.
Meanwhile, roughly one-third of the chief financial officers surveyed believe investment opportunities are improving. Additionally, only 29% of CFOs believe investment opportunities are getting worse.
More than 25% of CIOs believe that private equity will be the best performing asset class in 2014. Insurers also expect U.S. and European equities to deliver strong relative returns.
Only 6% of the CFOs surveyed believe their peer group is taking on too much investment risk, compared to roughly 30% in 2013. About 20% of CFOs believe their peer group is taking insufficient investment risk.
Globally, both insurance company CIOs and CFOs consider credit and equity market volatility the greatest near-term risk. Monetary tightening is also considered a top macroeconomic risk.
Of the CIOs surveyed, more than 20% indicated that deflation is a risk in the next year, double the percentage for 2013. Inflation remains a medium-term concern, with roughly 80% of CIOs viewing it as a risk in the next two to five years.
GSAM Insurance Asset Management surveyed a total of 233 CIOs and CFOs in February and March, representing more than $6 trillion in insurance balance sheet assets.
