GSAM Finds Insurer Skepticism toward Investment Opportunities Increasing

Goldman Sachs Asset Management (GSAM) today released the findings of its seventh annual global insurance survey, “Foggier as We Climb,” revealing that insurers are more pessimistic about the current investment environment. The survey found insurers feel investment opportunities have deteriorated year over year, with 50 percent of insurers saying they felt opportunities are getting worse, up from 36 percent last year.

The survey found that in response to this increasing concern, more respondents (17 percent, up from 10 percent last year), are looking to de-risk their portfolios rather than increase risk (16 percent, down from 26 percent last year). This is the first time since the survey’s inception in 2011 that more respondents say they are looking to de-risk rather than increase risk.

“2018 marked the return of market volatility for the first time in nearly a decade, rattling markets and leading insurers to question the current investment landscape,” said Michael Siegel, GSAM’s Global Head of Insurance Asset Management. “While low returns have been the main concern in the insurance industry for the last several years, the changing economic environment is leading to more focus on protecting portfolios in the event of a downturn.”

To conduct the survey, GSAM interviewed 300 CIOs and CFOs at global insurance companies, representing more than $10 trillion in balance sheet assets and more than onethird of the industry’s global assets.

Notable highlights from the survey include:

  • Concern for the first time in several years over rising inflation and interest rates; 85 percent of insurers agree inflation is a concern over the next five years and 65 percent predicted the 10-Year US Treasury yield will exceed three percent by the end of 2018
  • Respondents maintaining a positive equity market outlook despite economic uncertainty, with 77 percent believing S&P 500 Index returns will be positive this year
  • Growing insurer interest in higher returning, less liquid asset classes such as private equity, infrastructure debt, commercial mortgage loans and middle market corporate loans and a movement towards floating rate assets
  • ESG continuing to gain interest among insurers, with 40 percent taking it into account when making investments, up from 32 percent last year
  • Big data and artificial intelligence on the rise; 15 percent of global insurers currently use it in their portfolios, while an additional 40 percent are considering implementing it in the future
  • Cryptocur
    rencies currently do not play a role in the investment portfolio, yet a third of companies feel it is too early to determine if there is a role for cryptocurrencies
  • Insurers are less worried about political events and a China slowdown impacting the investment landscape, instead a top concern this year is the likelihood of a slowdown or recession in the US followed by equity and credit market volatility

    This year the Insurance Asset Management team expanded their reach and conducted a supplemental survey targeting retail distribution business leaders in North America. This supplement compared the views of North American business leaders and general account CIOs on a broad range of topics including macro risks, market outlook, the credit cycle and evolving industry themes. The supplement found that the top three macro risks for retail distribution business leaders are credit and equity market volatility, potential US economic slowdown or recession, and deteriorating liquidity conditions.


    GSAM Insurance Asset Management partnered with KRC Research, an independent thirdparty research firm, to conduct the 2018 global survey and North American Life Insurance Supplement. The global survey and survey supplement received over 300 responses, including 249 CIOs, 36 CFOs, 13 individuals who serve as both CIO and CFO and 22 North American Business Leaders. By region, the global survey received 168 responses from the Americas, 77 from EMEA and 55 from Asia Pacific. The global respondent base included life, property & casualty, multi-line, reinsurance and health insurers. The 22 senior business leaders comprise business lines including annuities, retirement, executive benefits and mutual funds, and have responsibilities that include business line leadership and investment platform oversight. The global study represents insurers that collectively invest over $10 trillion in global balance sheet assets. News Wire & Equity Research: +31 084-0032-842

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