The 2024 investment landscape has been marked by significant macroeconomic and market volatility. For our 13th Global Insurance Report, BlackRock surveyed 410 insurers globally to identify key themes that are at the forefront of insurers minds.
Although global growth is slightly higher than last year’s forecast, it remains subdued compared with the pre-pandemic era. With many inflation indicators slowing, central banks are cautiously approaching monetary policy normalization, while carefully monitoring the risk of persistent, structural inflation. In our view, this rate environment is compounded by regulatory and political uncertainties amidst global elections and escalating geopolitical tensions.
In this year’s report, we identify four key themes that are capturing the global attention of insurers: (1) Shifting horizons; (2) Diversifying risk and income; (3) Financing the infrastructure gap; and (4) Streamlining the operating model.
Shifting horizons
In this year’s survey, insurers identified regulatory developments (68%) and geopolitical tension and fragmentation (61%) as top macro risks. With 2024 being the biggest election year in history, these concerns underscore the uncertainty surrounding future policymaking.
Conversely, there is no global consensus on the market outlook. A significant majority, 86% of respondents from EMEA and 87% from North America, anticipate that central banks will engineer a soft landing. As inflation eases, they expect rates to begin falling, leading to a gradual economic slowdown.
In Asia Pacific, 76% of respondents do not anticipate a landing, expecting rates and inflation to remain high and the economy to stay resilient. In Latin America, opinions are mixed, with a higher percentage (18%) expecting a hard landing relative to other regions.
Within developed market economies, which is the most likely scenario over the next year?
Respondents identified Interest rate risk (69%) and liquidity risk 52%) as their most serious market risks. With global interest rates higher than they were three years ago, investment yields for portfolios have improved and insurers are taking advantage of this environment by leveraging opportunities in both public and private markets.
Insurers are planning to increase their private market exposure to diversify risk and income.
Insurers are looking at this thematic area as a way to expand their low-carbon transition investment strategy.
Insurers recognize the importance of investing in technology.
Financing the infrastructure gap
The low-carbon transition is an important consideration for insurance companies, with 99% of those surveyed setting some sort of transition objective within their investment portfolios.
Seizing the moment for clean energy infrastructure
To support their low-carbon transition strategy, clean energy infrastructure such as wind and solar (60%) and technologies such as batteries and energy storage (60%) were identified as the top two thematic areas that insurers plan to target.
A wide array of opportunities
Governments have traditionally built and maintained critical infrastructure, but with national debt tripling since the 1970s, it is unlikely they can fund it alone. At the same time, the maintenance and expansion of infrastructure is just one of many demands on companies’ resources relative to their ability to fund. This financing gap is creating new opportunities for insurers to invest in infrastructure across a wide range of investment options and sectors.
Streamlining the operating model
In an increasingly volatile and complex macroeconomic and regulatory environment, insurers recognize the importance of investing in technology. Integrated asset allocation (63%) and asset liability management (61%) were named as strategic priorities for their technology platforms. Regulatory capital integration (51%) was also cited as an area where technology could add value. As insurers look to continue their deployment into private markets, 53% of respondents view private asset modeling as an additional area to leverage technology.
https://www.blackrock.com/institutions/en-us/global-insurance-report-2024
