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Insurers expect better returns, investment opportunities — GSAM survey

More insurers are feeling less pessimistic about the global economy and expect their returns to increase despite feeling cautious because of political uncertainty, according to a Goldman Sachs Asset Management survey.

In GSAM's sixth annual review of the investment sentiment of the global insurance industry, 36% of insurers believe their investment opportunities are getting worse, far below the 48% that expressed that belief in the 2016 survey. In 2015, 63% of insurers felt their opportunities were getting worse.

Forty-one percent of insurers believe those opportunities are the same as the previous year, compared to 23% in 2016, while 23% of insurers felt that opportunities are getting better, compared to 29% in 2016.

“The survey clearly points to a favorable view on the global economy and optimism for higher equity prices and higher interest rates,” said Michael Siegel, GSAM's managing director and global head of insurance asset management, in a news release. “This optimism is translating into greater risk-taking in equities, less liquid assets and, in particular, fixed-income credit.”

Thirty percent of global respondents said they planned to increase credit risk. By region, 55% of respondents in the Asia-Pacific region said they planned to increase credit risk, 29% of respondents in Europe, the Middle East and Africa, and 22% in the Americas said they planned to increase credit risk.

Overall, globally, the majority of insurers intend to maintain current levels of portfolio risk, except for Asia-Pacific, where 59% of survey respondents said they intended to increase the overall risk of their investment portfolio. Only 20% of survey respondents in the U.S. and 18% of respondents in EMEA said they intended to increase that risk.

When asked which investment risk concerned them the most, 35% of all respondents expressed that low yields brought about the most concern, followed by 21% citing credit quality deterioration and 18% citing rising interest rates.

The 2017 GSAM Insurance Asset Management Survey received responses from 317 chief investment officers and chief financial officers, representing an industry with more than $10 trillion in assets.