Most insurers believe that the U.S. will enter an economic recession sometime within the next two years, according to results of the latest annual Goldman Sachs Asset Management insurance survey.
This year's survey reveals that 41% of insurers said they believe the U.S. economy will enter a recession in 2020, while 41% believe it a recession will occur in 2021. Meanwhile, only 2% believe it will happen in 2019, while 16% don't expect a recession to happen at all in the next three years.
Survey results also showed that slowing global growth and the reintroduction of market volatility has led to heightened credit cycle concerns, with 85% of respondents believing the economy is in the late stage of the cycle, up from 34% from last year's survey.
The survey respondents also indicated that investment opportunities are either stagnant (46%) or getting worse (40%), with only 14% indicating the opportunities are improving.
Concern about rising interest rates declined considerably — expressed by 7% of respondents, down from 30% last year — as insurance investors are becoming more concerned with the deterioration of credit quality within their portfolios (38%, up from 23% last year).
In addition, respondents are far less concerned about inflation in the next three years in their domestic markets (27%, down from 74% last year). Meanwhile, more than half of respondents (62%) expect the 10-year U.S. Treasury yield to remain in the 2.5% to 3% range by year-end, a break from previous results that had an upward bias to rising rates.
Roughly 62% of insurers surveyed include environmental, social and governance as one of several investment considerations, with the uptake being much higher in Europe (83%) and Asia-Pacific (81%) than in the Americas (43%).
"As global insurers prepare for a potential market downturn, they are taking a more selective approach to risk by decreasing allocation to public equities," said Michael Siegel, GSAM's global head of insurance asset management, in a news release announcing the survey results. "Insurers are also shifting their asset allocation to higher returning, less liquid asset classes such as private equity in order to avoid exposure to the increased volatility as speculation around a recession continues to rise."
Year-over-year, 10% more respondents ranked political events as a top three macro risk (42%), with regional consensus indicating that most insurers (53%) see the U.S.-China trade conflict as the greatest risk to investment portfolios over the next 12 months.
GSAM surveyed 307 CIOs and chief financial officers in February, representing more than $13 trillion in insurance balance sheet assets.