Battling low interest rates while hunting for higher returns, insurers had been stacking on the risk to ensure they got a return on their investments. A new study by BlackRock, the world’s largest asset manager, says those same insurers are now worried about financial instability but instead of bailing out of higher-risk opportunities, they’re reshuffling their holdings to create a safety net.
“In recent years, insurers have been increasingly willing to take higher risks in favor of investment success,” said Patrick Liedtke, head of the European insurance business at BlackRock. “That is now over.”
Faced by a growing fear of external dangers, most insurance companies are no longer willing to take on any fresh risks for their investment portfolios, Mr. Liedtke said, summarizing a key finding of the global survey of 315 top managers in the industry. The survey was commissioned by BlackRock and conducted by the Economist Intelligence Unit in July.
This marks a turning point for the industry at a time when the German blue-chip DAX index hit an all-time high while its Spanish peer is at seven-month lows because of worries over Catalonia’s potential secession from Spain. While 46 percent of insurers were willing to take higher risks in 2016, the figure is only 9 percent in 2017. In contrast, 91 percent of respondents said they want to reduce or stabilize their investment portfolio’s risks (see graphic below).