This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

QE Uncertainty Hurting Insurers’ Income Streams And Driving Them Into Riskier Assets, Says New BlackRock Study

Quantitative easing (‘QE’) and uncertainty around tapering of asset purchases by the Federal Reserve and other central banks is limiting the ability of insurance companies to generate returns, and driving them to diversify towards riskier assets, according to new research into the investment strategies of over 200 insurers globally.

Unveiled in a report called Global Insurance: Investment strategy at an Inflection Point?, produced by BlackRock, Inc. (NYSE:BLK) in partnership with The Economist Intelligence Unit (‘EIU’), the results highlight insurers’ changing investment attitudes in response to central bank policy. With last Wednesday’s decision to continue QE at its current pace, the report suggests insurers need to consider how this uncertainty affects their overall strategic asset allocation and the potential impact on their businesses.

Low yields on investments were identified as the most critical driver of change affecting the industry with 73 per cent of respondents citing this. 80 per cent agreed their business will have to change to produce adequate shareholder returns over the next three years.

When QE ends or tapers, however, insurers are expecting rising interest rates, but there are widely divergent views on when QE will end. The majority of insurers internationally (52 per cent) believe QE will end within one and two years, while 35 per cent think it will continue for more than two years. 13 per cent, however, see QE ending within a year.

In a ‘QE-infinity’ world before potential tapering was discussed by the Fed, insurers said they were highly likely to increase allocations to riskier, higher-yielding fixed income instruments such as bank loans and lower rated debt (73 per cent), and illiquid strategies (68 per cent). In an environment where QE tapering was expected, however, insurers changed their investment approaches and risk appetite. After the Fed’s introduction of an unofficial tapering timeline in late June, just 52 per cent said they were looking to invest in new, diversifying fixed income asset classes; only 33 per cent were willing to take on more investment risk; and just 17 per cent were seeking illiquidity premia.

1 of 5

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AAPL $94.02 0.00%
FB $104.07 0.00%
GOOG $683.57 0.00%
TSLA $162.60 0.00%
YHOO $27.97 0.00%


Chart of I:DJI
DOW 16,204.97 -211.61 -1.29%
S&P 500 1,880.05 -35.40 -1.85%
NASDAQ 4,363.1440 -146.4150 -3.25%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs