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Goldman Sachs Insurance Asset Management

Insurance Survey 2021

The tenth annual report released by Goldman Sachs Insurance Asset Management incorporates the views of 286 Chief Investment Officers (CIOs) and Chief Financial Officers (CFOs) representing over $13 trillion in global balance sheet assets. which accounts for approximately half of the global insurance industry.

 

An accelerating economy and hope for a dissipating global pandemic set the backdrop for this year’s Goldman Sachs Asset Management Insurance Survey, which reveals improving economic conditions amid considerable uncertainty. The likelihood of an effective vaccine distribution has increased in the first quarter of 2021; however, the roll-out has varied across regions and population segments across the globe. Nonetheless, an effective vaccine and corresponding distribution continues to provide positive momentum on bond yields, which are still depressed below pandemic levels. Investors are motivated to continue their search for yield across the risk curve into both opportunistic fixed income sectors and into equities and private assets.

 

This year’s survey looks at market insights and trends, including the rise of global reflation accompanied by a rigorous desire for yield, a drive for risk-on fixed income allocations, and a growing emphasis on Environmental, Social & Governance (ESG) considerations. Global insurers plan to significantly increase overall risk in their investment portfolios and also heavily add to their private equity, middle market corporate loans and infrastructure debt allocations. This sentiment comes as the majority of insurers retraced expectations from prior years that credit quality is deteriorating, and they largely no longer expect a recession in the next three years. This year’s title, Running the Risks, underscores insurers’ approach of leaning into risk, despite low yields, tight credit spreads and high equity valuations.

Key Takeaways

Growth vs. Liquidity

Are you planning to increase, decrease, or maintain the overall risk in your investment portfolio?

Insurers plan to increase the risk in their investment portfolios, likely by shifting cash balances into higher risk asset classes. As uncertainties have waned amidst the global pandemic, risk sentiment has emerged decidedly positive. We expect a continued retraction of liquidity in favor of increased equity, credit and duration risks.

Participants (Regional, %)
A Primary Consideration
One of Several Considerations
Not a Consideration
Global
Americas
EMEA
Asia

Environmental, Social & Governance (ESG)

To what extent is ESG and/or Impact Investing an investment consideration?

ESG consideration increased 4% from last year, echoing the merit of sustainable technologies, evidence for alpha generation, changes in consumer preferences and the risks of poor ESG practices. We continue to find that ESG adoption is not limited to the investment portfolio, but also emerges alongside company-wide initiatives.

Return Enhancement

Identify the five top asset classes where you plan to increase your allocation.

Insurance respondents expect global growth, as evidenced by a drop in recession concerns and a risk-on investment sentiment. However, as global interest rates maintain historically low levels, investors continue to prioritize return-enhancing assets—private equity, middle market corporate loans, infrastructure debt, collateralized loan obligations and emerging market debt.

Participants (Regional, %)
Private Equity
Middle Market Corporate Loans
Infrastructure Debt
Collateralized Loan Obligations
Emerging Market Corporate Debt
Participants (Global, %)
2017
2018
2019
2020
2021

Expectation for Reflection

When do you expect inflation will be a concern in your domestic market?

Insurers express a potential for reflation as they expect nearer-term inflation, a continued bond yield sell-off and accelerating global economic growth in 2021. Effective vaccination programs and economic reopening signals to investors that inflation may be probable, potentially driving treasury yields higher. An expectation for inflation in the next five years has increased 30% globally year-over-year.

Resources

 

PDF

2021 Goldman Sachs Asset Management Insurance Report

Goldman Sachs Asset Management released the findings of its tenth annual insurance survey, “Running the Risks,” revealing global insurers lean into risk despite low yields, tight credit spreads and high equity valuations.

Read More

 

GSAM Connect

Inflation – It's a Jungle Out There

Are we moving into a higher inflation regime? We revisit this question as it remains top of mind for fixed income investors.

Read More

 

GSAM Connect

Pause for Inflation and Policy Real-ity Check

Real yields have recently trended higher, albeit from low levels. For investors, the driver behind the rise is important. It’s time to pause for an Inflation and Policy Real-ity Check.

Read More

About the Survey

This year, Goldman Sachs Asset Management conducted its tenth annual insurance survey. The survey provides valuable insights from Chief Investment Officers (CIOs) and Chief Financial Officers (CFOs) regarding the macroeconomic environment, return expectations, asset allocation decisions, portfolio construction and industry capitalization. We received responses from 228 CIOs and senior investment professionals, 50 CFOs and senior finance managers and eight individuals who serve as both the CIO and CFO.

Our survey included insurance companies that invest over $13 trillion in balance sheet assets, which represents around half of the balance sheet assets for the global insurance sector. The participating companies represent a broad cross section of the industry in terms of size, line of business and geography.

Disclosures

Views expressed discussed are those of survey respondents, compiled by GSAM as of March 4, 2021.

2021 survey results as of March 4, 2021. 2020 survey results as of February 28, 2020. 2019 survey results as of February 26, 2019. 2018 survey results as of February 28, 2018. 2017 survey results as of February 22, 2017. 2016 survey information as of February 24, 2016. 2015 survey results as of February 25, 2015. 2014 survey results as of March 6, 2014. 2013 survey results as of March 5, 2013. 2012 survey results as of May 24, 2012.

This material is provided for educational purposes only and should not be construed as investment advice or an offer or solicitation to buy or sell securities. This material is provided at your request for informational purposes only. It is not an offer or solicitation to buy or sell any securities.

Views and opinions expressed are for informational purposes only and do not constitute a recommendation by GSAM to buy, sell, or hold any security. Views and opinions are current as of the date of this presentation and may be subject to change, they should not be construed as investment advice.

Economic and market forecasts presented herein reflect a series of assumptions and judgments as of the date of this presentation and are subject to change without notice. These forecasts do not take into account the specific investment objectives, restrictions, tax and financial situation or other needs of any specific client. Actual data will vary and may not be reflected here. These forecasts are subject to high levels of uncertainty that may affect actual performance. Accordingly, these forecasts should be viewed as merely representative of a broad range of possible outcomes. These forecasts are estimated, based on assumptions, and are subject to significant revision and may change materially as economic and market conditions change. Goldman Sachs has no obligation to provide updates or changes to these forecasts. Case studies and examples are for illustrative purposes only.

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