Regional split on insurers’ concerns

Although globally insurers’ chief investment officers (CIOs) are most concerned about ongoing monetary easing, in pan-Asia CIOs are increasingly concerned with near-term market volatility. 

Goldman Sachs’ Asset Management (GSAM) global survey of 252 CIOs and chief financial officers found that although ongoing monetary easing had replaced the European debt crisis as insurers’ number one concern, this concern was concentrated in the US, Europe, the Middle East and Africa, with more Pan-Asian insurers concerned with near-term market volatility (67 per cent). 

However, CIOs have developed a more positive investment outlook, with 31 per cent of insurers anticipating improved investment opportunities this year compared to just 14 per cent in 2012.  

Equity market volatility (18 per cent) and inflation (14 per cent) were also highlighted as macroeconomic concerns by CIOs globally. 

The GSAM survey found the majority of insurers anticipated heightened market volatility across currency markets, equity markets and interest rates markets, with 40 per cent of CIOs anticipating a tightening of credit spreads over the next 12 months. 

More than 40 per cent of CIOs globally believe inflation will be a risk in the next two years, while 36 per cent believe it will stretch out to three-to-five years. 

Inflation-linked bonds (26 per cent), floating rate assets (19 per cent) and real estate (17 per cent) were seen as the best defensive assets in an inflationary environment. 

Over half (52 per cent) of respondents cited low yields as their greatest investment risk, although concern about rising interest rates was growing in importance, with last years’ figures doubling to 32 per cent. 

Over half believed interest rates would rise significantly over the next two to three years, while 40 per cent of those believed this would stretch out to three to five years.