- Alternatives and equities grow more attractive. More than one-quarter of the CIOs surveyed believe private equity will be the best performing asset class in 2014. Insurers also expect US equities and European equities to deliver strong relative returns.
- Portfolio allocations are shifting. CIOs plan to increase allocations to asset classes that can offer higher total return potential, an illiquidity premium, and protection against rising rates and inflation. They plan to decrease allocations to cash, short-term instruments, and government and agency debt, for which they have the lowest near-term return expectations.
- CFOs are more optimistic than CIOs about the investment environment. Roughly one-third of the CFOs surveyed believe investment opportunities are improving, compared to one-quarter of CIOs. Additionally, only 29% of CFOs believe investment opportunities are getting worse, compared to more than 40% of CIOs.
- CFOs are more comfortable with investment risk. Only 6% of the CFOs surveyed believe their peer group is taking on too much investment risk, compared to roughly 30% in 2013. Approximately 20% of CFOs believe their peer group is taking insufficient investment risk.
- Concern about market volatility is elevated. Globally, both CIOs and CFOs consider credit and equity market volatility the greatest near-term risk. Monetary tightening is also considered a top macroeconomic risk.
- Deflation is a nearer-term concern. More than 20% of the CIOs surveyed indicated that deflation is a risk in the next year, double the percentage for 2013. Inflation remains a medium term concern, with roughly 80% of CIOs viewing it as a risk in the next two to five years.
- Third party capital inflows are a growing concern. Half of the P&C insurers surveyed believe that alternative capital inflows will have negative implications for pricing, compared to only 13% of Life insurers. Nearly half of EMEA-based CFOs expect alternative capital to negatively affect pricing this year.
GSAM’s Third Annual Insurance Survey Shows Insurers Are Going On The Offense To Combat Low Yields
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