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Pandemic caused major shifts in investment portfolios, report finds

ESG worldThe 2022 bfinance Insurer Investment Survey has revealed major shifts in asset allocation, investment risk exposures and ESG practices during the pandemic, driven by long-term pressures and the effects of Covid-19.

The survey found most insurers are set to further cut their fixed income allocations in the next 18 months.

A further 61% of insurers are planning to enter unfamiliar asset classes, including Emerging Market Debt, Private Equity, and Infrastructure Equity and 74% are expected to increase portfolio liquidity.

Insurers are also planning to increase their risk exposure with 73% saying there was the possibility to add more risk to their portfolios.

The survey highlighted greater efforts towards ESG, including a 120% rise in the proportion of insurers integrating ESG factors since before the pandemic.

It also found more insurers were taking part in exclusions/negative screening, carbon reporting and impact investment. bfinance stated the proportion of net-zero investment commitments is set to rise from 24% to 64%.

The survey also found that 46% of the insurers had increased their investment team headcounts during the pandemic period and were planning to further increase them, especially in ESG where 59% of them plan to add more staff.

Kathryn Saklatvala, head of investment content at bfinance, said: “The pandemic and its impact on inflation, rates and systemic risk have produced a distinct observable change in the pace and direction of travel, speeding up the pre-existing shifts towards new asset classes and portfolio illiquidity — despite the challenges these can pose within insurers’ regulatory frameworks and in-house risk models — and producing a clearer movement in favour of equity risk exposure.”

The survey drew on data from almost 90 insurers in 20 countries, whose combined portfolios exceed $5 trillion.

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