Seeking Alpha

BlackRock: Insurance investment strategy must change

  • 80% of insurers say their businesses will have to change to produce adequate returns over the next three years, is one of the conclusions of a BlackRock study: Global Insurance: Investment strategy at an inflection point?
  • The low-yield environment has forced a majority of the industry to fine new fixed asset classes to invest in, and half to find new asset classes - like alternatives and derivatives - in which to put money. Along with those changes are greater risk management - 90% have increased investment in this area.
  • Turning to operations, nearly two-thirds say regulatory changes are stopping them from moving into certain lines of business, particularly guaranteed products.
  • Samples: "Pre-2008 crisis, mortgage-backed securities, corporate credit structures and credit default options were a large part of the supply, and that’s no longer there ... the supply of fixed income is minimal whereas the demand is greater than ever on the part of institutional investors."
  • "The action of regulators, principally in Europe, has been to reduce the supply of capital available to provide ready markets to legitimate investors such as ourselves."
  • ETFs: KIE, IAK, KBWP, KBWI.
  • Individual names of interest: MET, PRU, HIG, XL, MMC, AXAHY.PK.
Comments (1)
  • This is the sowing of the seeds for the next financial crisis.
    26 Sep 2013, 01:24 PM Reply Like
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