Global insurers predict investment decline to bottom out in 2023

Written by Adam Cadle

07/10/2021

Global insurance chief investment officers (CIOs) predict that overall investment yields on their portfolios will bottom out by the start of 2023, new research has shown.

Private equity firm, KKR, surveyed over 50 global CIOs with almost $7trn in assets under management. It said 2023 is “when we expect the Fed to begin raising rates, and also when we think 10-year yields could potentially edge north of 2%”.

P&C survey participants have seen their average investment yield slip to 2.7% from 3.0% in 2020 and 3.9% in 2017. Within life and annuity, yields slipped more modestly to 4.0%, flat versus 2020 but down from 4.2% in 2017.

CIOs have made substantial changes in their asset allocation to offset the negative impact of Quantitative Easing. Non-traditional investments account for 31.8% of survey respondents’ portfolios versus 20.3% in 2017.

The survey also showed that the shift towards alternatives is far from over. A net 48% of respondents said they intended to increase their allocations to private equity, a net 60% planned to increase allocations to infrastructure and a net 48% planned to do so for private credit.

In terms of risks, two-thirds of respondents cited inflation/deflation as their most worrisome macro risk factor.

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