Insurers are looking to increase risk in order to fight back trend of low yields
Goldman Sachs Asset Management has release its latest annual survey of the insurance industry’s leading Chief Investment Officers and Chief Financial officers. These insurance officials represent organization with more than $6 trillion in global balance sheet assets. The survey is the third of its kind from Goldman Sachs, which aims to release these reports every year for the foreseeable future. Notably, the survey shows that insurers may be willing to take on additional risk in order to combat low yields.
Insurers are feeling the financial pressure caused by a year of low yields
The survey notes that the insurance industry remains focused on the search for returns. Over the past year, insurers have been battered by losses coming from natural disasters, political unrest, changes in certain markets, and various other issues that are beyond their control. These losses have been amplified by low yields, which have placed some insurance companies in a precarious position when it comes to risk exposure and mitigation.
Some organizations are making risky gambles on non-core assets
According to the survey, many insurers are beginning to take on additional risks in order to derail the trend of low yields. Some are planning to make substantial allocations to floating-rate bank loans, which are inherently risky due to the relative volatility of the current economic climate. Many insurers are also looking to increase their allocations to less liquid assets, focusing on infrastructure debt and private equity. The survey shows that while these initiatives may be risky, insurance executives are relatively comfortable with making these moves.
Insurance industry expected to remain
The insurance industry remains resilient against potential financial losses in the future, but low yields are placing more organization under significant financial pressure. If the trend continues, insurers may have to embrace more risk, which could actually lead to more losses. The insurance industry is quite well versed in such gambles and is poised to handle the issue if it’s risky-prone maneuvers do not pay off as planned.