Schroders Institutional Investor Study 2018 - An Insurance Focus

Insurance investors are increasingly placing risk management at the heart of their investment philosophy.

This comes as they seek to meet the growing challenge of meeting their return expectations amid a backdrop of ongoing political and economic instability, Schroders Institutional Investor Study 2018, An Insurance Focus, has found.

This attempt to batten down the hatches has resulted in many shortening their investment time horizons and becoming increasingly cautious in their return expectations.

Confidence down, risk up

This year’s study registered a drop in anticipated performance on behalf of insurance investors as fewer (60% vs. 76% in 2017) expect returns of 5% or more. Their level of confidence in achieving those results has also dropped to 54% from 61% last year.

Risk takes many guises and insurers globally believe a trio of factors – political and world events (26%), higher interest rates (25%) and the potential for a global economic slowdown (23%) – are all set to affect performance in the next 12 months. This uncertain backdrop is reinforced by the majority of insurers expecting to see a rise in equity market volatility (72%), interest rate risk (72%) and credit defaults (63%).

Sustainability growing in prominence

Sustainability has also climbed in prominence among insurance investors. This year a third (33%), up from 24% last year, say sustainability now plays a part in influencing their investment decisions. Further, a greater number of insurance investors believe sustainability will become more important in the next five years (73% vs. 66% in 2017).

The desire to balance risk and return manifests itself through the time horizons of insurance investors. Globally, time horizons are getting shorter as fewer invest over a full market cycle (10% vs. 14% in 2017), while the percentage of insurers’ portfolios turned over each year has jumped significantly from 13% to 19%.

Defensive footing

This shorter-term view could be driven by the pressures to provide retirement income as more (38% vs. 30%) say this burden is causing them to focus on short-term results. This defensive footing is supported further by insurers showing an increasing desire to prioritise the need to meet client income and yield requirements as an investment objective in the next 12 months (70% vs. 52% in 2017).

Active management is also favoured in insurance investors’ search for returns. Almost three quarters (73%) of insurer portfolios are typically held in active investments, a reflection of their belief in this approach being the most likely to garner returns in this uncertain climate.

Markets have enjoyed a great run in recent years, our survey shows that insurers are now growing wary which could indicate that this may be coming to an end.



The insurers we have surveyed are increasingly looking at bespoke risk-managed solutions and diversifying private assets to generate the returns they require with acceptable risk. Sustainability is also coming sharply into focus as a feature of our insurance clients’ investment requirements.



The survey confirms the importance of asset managers having insurance-specific investment expertise to deliver the actively managed and tailored solutions required to meet insurers’ increasingly sophisticated objectives.

Paul Forshaw, Global Head of Insurance Asset Management, Schroders

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