COVID-19 accelerating over three quarters of insurers’ ESG focus

Written by Adam Cadle

21/10/2020

More than three quarters of insurers (78%) have said the impact of COVID-19 is accelerating their focus on ESG.

According to a new report published by BlackRock capturing the insights of 360 senior executives across 25 major insurance markets, over 50% of respondents have invested in specific ESG strategies in the last year, and a further 52% have made ESG a key component of their investment risk assessment for new investments. Nearly one in three (32%) have turned down an investment opportunity in the last 12 months due to ESG concerns.

Over 60% of insurers are worried about negative portfolio performance and potential COVID-related pay-outs. Nevertheless, nearly half of all insurers say they are looking to increase risk exposure over the next 12-24 months, with alternatives and equities being the favoured asset class. At the same time, insurers are looking to increase cash holdings, with many waiting for the right investment opportunities.

In the face of prevailing uncertainty and prolonged low rates, close to 60% are looking to reposition their portfolios to combine a focus on higher quality assets with more diversification, as well as increasing portfolio flexibility with strong governance. Risk appetite is robust with 47% looking to increase risk. The macro and market risks insurers are most concerned about include geopolitics (57%), asset price volatility (64%) and liquidity (58%). Persistent low rates across developed markets are leading insurers to embrace meaningful allocations to illiquid alternatives and higher yielding emerging market assets.

Anna Khazen, head of BlackRock’s financial institutions group for EMEA, noted: “Resilience and diversification are at the heart of insurers’ investment approach, with the recent environment re-enforcing the importance of both. Whilst we see a continued desire to diversify, in particular into private assets, almost two thirds of companies are focused on the quality and resilience of their credit portfolios, combined with nimbler decision making.”

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