The appetite for risk has been driven by record low interest rates that have created a challenging return environment among traditional fixed-income allocations, and insurers are more willing to invest in less traditional asset classes for insurers. Sixty-one percent expect to add more asset classes to their portfolios in the next 18 months.
Forty-nine percent of respondents said changes made since March 2020 have been influenced by the pandemic. Since then, 68% of respondents have increased their allocations to alternative investments, and 79% expect to increase their allocations to alternatives over the next 18 months.
Regarding specific asset classes, 75% expect to have allocations to emerging markets debt in 18 months, while 62% said they had an allocation to that asset class in October, and only 49% had that allocation in March 2020.
The pandemic has also inspired insurance companies to embrace ESG processes, the report said. In October, 71% of survey respondents said they integrate environmental, social and governance factors into their investment processes, while 32% said they did so in March 2020.
The average asset allocation of the surveyed insurers was 67% fixed income, 10% equities, 8% alternatives, and 7% each real estate and money market funds/cash. The total does not come to 100% due to rounding.
Bfinance surveyed 90 insurance company executives from 20 countries with combined investment portfolios totaling nearly $5 trillion.
The report is available on bfinance's website. Registration is required.
