Insurers are increasingly concerned about climate-related risks, with 95% of executives confirming it will have a significant impact on building the portfolio over the next two years, according to BlackRock’s tenth annual report on global insurance .
BlackRock consulted with 362 insurance executives in 26 markets representing $ 27 billion in investable assets, on their investment intentions and business priorities for the coming year.
The dominant themes for insurers this year were sustainability, the requirement to diversify portfolios into higher yielding asset classes and the drive to digitize businesses.
The findings follow an unprecedented increase in natural disasters over the past year, reflecting the perspective of an industry that is directly exposed to the physical risks associated with climate change.
Charles Hatami, Global Head of Financial Institutions Group and Financial Markets Advisory at BlackRock, said: “An overwhelming majority of insurers view climate risk as an investment risk and position their portfolios to mitigate risk and capitalize on the transformational opportunities presented by the transition to a net zero economy. The growing interest of insurers in sustainability should be a wake-up call for the investment industry.
Sustainable investing has continued to gain in importance among global insurers, with half of respondents saying the reallocation of existing assets to sustainable investments is due to the ability of assets to generate better risk-adjusted performance.
Meanwhile, geopolitical risk remains a major concern for insurers, with one in three respondents saying environmental risk is now seen as a serious threat to their company’s investment strategy.
The results showed that insurers continue to integrate sustainability into their investment processes and strategies, as nearly half of those surveyed confirmed that they had turned down an investment opportunity in the past 12 months due to ESG concerns. .
The need to diversify was also a major trend, with 60% of insurers planning to increase their exposure to investment risk over the next two years – the highest level since BlackRock started tracking this information in 2015.
Accelerating digital transformation was a priority for insurers, with nearly two-thirds of insurers looking to increase their spending on technology over the next two years.
The industry is particularly moving towards integrated asset and liability management (ALM) capabilities due to the competitive landscape, regulatory complexity and the economic environment.
Digitization is also important to achieving net zero ambitions – 41% of respondents confirmed they are looking to increase investment in technology that incorporates risk and climate action.
Daniel Dunay, Head of Financial Institutions for the Americas at BlackRock, said: “A complete and transparent view of dynamic portfolio risk, in particular the risk associated with climate change, is not just a competitive advantage for insurers – it is a necessity. “