33% of insurers believe S&P will give negative returns in 2022: Survey findings

On the whole, global insurers expect to increase equity risk in 2022 but the net risk-on equities appetite has decreased compared to last year.

S&P 500, total return, equity, inflation, investment, risk, insurers
Primary concerns remain increased rate hikes, heightened US 10-year Treasury yields, and elevated inflation expectations.

Consistent with prior years, the majority of insurers expect modest positive returns for the S&P 500 Index in 2022. However, due to increased concern around credit and equity market volatility, about one third of insurers believe the S&P will return negative results in 2022. This is what came out of the Goldman Sachs Insurance Asset Management’s 11th annual global insurance investment survey findings.

The survey incorporates the views of 328 Chief Investment Officers (CIOs) and Chief Financial Officers (CFOs) representing over $13 trillion in global balance sheet assets, which account for approximately half of the global insurance industry.

In a sharp reversal from prior years, insurers now see rising inflation and tighter monetary policy as the largest threats to their portfolios.

Pandemic induced supply bottlenecks and rising commodity prices may ease somewhat as higher borrowing costs temper demand.

Respondents expect inflationary pressures to persist amid wage growth and strong employment gains. As the easy monetary policies of the pandemic-era are unwound, expected rate hikes are top of mind.

When asked which asset class they believe provides the best inflation hedge, the insurers indicated real estate and floating rate assets as the most effective inflation hedges.

As far as risk taking is concerned, when asked whether they are planning to increase, maintain, or decrease the overall risk in your investment portfolio in the next 12 months, the overall risk tolerance appears to be lower in 2022.

Since 2019, global insurers have increased their risk appetite year over-year; however, given uncertainty as to where investment opportunities lie, overall risk tolerance is lower in 2022 than it was in 2021. On the whole, global insurers expect to increase equity risk in 2022. But the net risk-on equities appetite has decreased compared to last year.

In a sharp reversal from the past two years, rising interest rates displaced low yields as the primary investment risk. This aligns with concerns about increased rate hikes, heightened US 10-year Treasury yields, and elevated inflation expectations.

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