Recession risk has become the most serious investment consideration for insurers, while inflation dynamics have been the biggest economic surprise this year, a global survey by BlackRock says.  

Some 59% of senior executives nominated recession risk as the most serious consideration, ahead of 46% for inflation risk. The high-rate environment, rising global corporate defaults and regulatory developments were other top issues. 

When asked about the biggest surprise this year, 71% nominated inflation dynamics, 56% market volatility, 54% central bank monetary policy and 43% banking failures. 

BlackRock’s 12th annual Global Insurance Report surveyed 378 senior executives in 27 markets with nearly $US29 trillion ($46 trillion) in assets under management. 

The report, in the second post-covid year, comes amid the “structural mega forces” of an aging population, the transition to a low-carbon economy, global fragmentation, the changing roles of banks and non-bank institutions and digital disruption, Financial and Strategic Investors Group Global Head Charles Hatami said. 

“These factors coupled with upcoming changes to insurance regulations and accounting regimes, create new challenges and opportunities for chief investment officers and other investors,” he said. 

Nearly two thirds of insurers have readjusted their strategic asset allocation, with a focus on flexibility and new investment opportunities, the report finds. 

Within overall fixed income portfolios, the most-cited planned increase to allocations was to government and agency bonds at 51%. Private markets allocations remain limited, with 69% of respondents noting only a 1-6% current allocation, though 89% of respondents expect to opportunistically increase the exposure over the next two years.  

The report shows insurers are focused on investment opportunities linked to the transition to a low-carbon economy, with 62% of respondents nominating clean energy infrastructure as the largest opportunity arising from the move to net zero. 

The survey also asks where tech and infrastructure investments will be prioritised over the next two years. Risk management and increased operational efficiency and reduced cost were both nominated by 47% of respondents, while 45% named compliance with regulatory needs and reporting requirements.