Nearly half of senior executives at insurance companies plan to increase their level of exposure to investment risk over the next year or two, while nearly half plan to maintain it, said a survey commissioned by BlackRock.
BlackRock's fifth annual global insurance survey found that 47% of respondents expect to increase their exposure to investment risk, while 46% plan to maintain their exposure over the next 12 to 24 months, and the rest will reduce their exposure.
This result signals a slightly greater level of caution than in 2015, when 57% of insurers globally planned to increase investment risk against 38% who expected to maintain it.
The survey also showed that 50% of insurers said they planned to increase their cash holdings in the next few months, up from 36% last year, while 47% still expect to increase allocations to government bonds — the highest figure across the entire range of fixed-income assets.
Meanwhile, 41% of insurers plan to increase their non-investment-grade bond weightings, compared to just 26% in 2015, and 21% plan to increase equity allocations, compared with 13% last year. At the same time, far fewer are planning to increase allocations to less risky investment-grade fixed income than last year — 21% compared to 45% in 2015.
The survey also revealed strong intentions to increase allocations to select private markets assets. More than half — 53% — of insurers plan to increase their exposure to direct commercial mortgage lending, vs. 38% last year, while in commercial real estate equity, 48% planned an increase vs. 30% last year. Interest in private equity highlights this shift as well, with 49% planning to increase allocations vs. 27% last year.
Weak global economic growth was ranked as the largest macro risk factor globally, by 52% of respondents. Geopolitical risk was the highest last year at 50%; it ranked second at 51% this year. Regulatory risk remains a significant macro risk factor globally, ranking third in 2016 at 46%, 6 percentage points higher than in 2015.
The survey was based on response from 315 senior insurance company professionals.