Insurers in Asia Pacific are keener to outsource more investments next year than those elsewhere in the world, but they are the most downbeat in terms of outlook, according to a new Goldman Sachs Asset Management survey.*
Nearly four in 10 (38%) of insurance companies in the region said they intended to hand more assets to external managers in the coming 12 months, as against the worldwide average of 18% (click on figure below left).
The greatest demand for increased outsourcing globally came from the biggest insurers. About a quarter of those with assets greater than $50 billion indicated an intention to outsource more, versus 20% of those with $5 billion to $50 billion and 12% of those with $5 billion or less.
Meanwhile, two-thirds of Asia-Pacific respondents said investment opportunities were worsening, against 26% that felt they were improving (see figure, below right).
As for where they will put their money in 2016, nearly half (45%) of firms in Asia planned to boost allocations to US investment-grade corporates, as against around a quarter of firms globally that intended to do the same.
The next two most popular asset classes among insurers in Asia Pacific (in terms of allocation plans for this year) were infrastructure debt (41%) and private equity (36%) (see figure, below left).
Some three in 10 (29%) of Asia insurance firms said they planned to increase overall risk in their portfolios (compared to 22% that planned to reduce it). This compared to the global average of 25% that intended to boost risk.
Globally the risk that worried insurers most was ‘low yields’, but a close second for Asia-Pacific firms was equity market volatility. The latter was far more of a worry for the latter group than their peers elsewhere, with the report suggesting that this was likely a result of the turmoil seen in Chinese stock markets at the start of the year.
Accordingly, one-third of insurers in Asia Pacific planned to reduce equity risk and increase portfolio liquidity (a significantly higher proportion than in other regions). Only one-fifth of Asia respondents intended to boost equity risk.
The highest returning asset classes overall this year were expected to be private equity, government/agency debt, and real estate equity, in that order. The overwhelming consensus was that emerging-market equities would be the worst performing, followed by cash/short-term instruments.
*Asia Pacific accounted for represented 58 of the total of 276 chief investment officers and chief financial officers polled. Overall, the respondents represented some $7 trillion in global balance-sheet assets.