Insurers Report Negligible Long-Term Changes to Investment Strategies

The firms—which have similar investing goals to DB plans and back investments included in some DC plans—are continuing a move to private assets.

It has been said that defined benefit (DB) plans can learn from insurers’ investment strategies. And it’s important for defined contribution (DC) plan sponsors to understand how insurance companies are faring in the current market, as insurance general accounts back certain DC plan investments.

The annual Insurance Report from Goldman Sachs Asset Management (GSAM) reveals the investment strategies insurance companies are using, their thoughts about environmental, social and governance (ESG) investing and exchange-traded funds (ETFs), and hurdles companies encounter related to ESG investing.

During a video discussion, Michael Siegel, global head of GSAM Insurance Asset Management, explained that GSAM typically surveys chief investment officers (CIOs) and chief financial officers (CFOs) at insurance companies right after the beginning of the year. This year’s survey included responses from 273 CIOs and CFOs representing more than $13 trillion in assets—half of the global insurance industry assets.

However, four weeks after the close of the survey, the World Health Organization (WHO) announced a pandemic, and some responses seemed no longer relevant, Siegel said. For that reason, in this year’s report, GSAM didn’t publish respondents’ outlooks for interest rates or equities, though he noted respondents were modestly bullish toward equities and modest toward rising interest rates before COVID-19.

GSAM did include in the survey report responses from one-on-one discussions with six CIOs that occurred three or four weeks ago. From these conversations, GSAM found that movement into private assets and securitized assets is continuing, and movement out of cash, government securities and hedge funds also is continuing. “There has been some pause on investing in middle-market lending, real estate and mortgage loans, as these are impacted by the virus’ effect on the economy,” Siegel said. “All need cash to bridge themselves through this event; insurers are taking a wait and see attitude.”

CIOs described negligible long-term changes to their investment strategies as a result of the market volatility brought on by the pandemic. Most had already reduced their portfolio risks as a result of expensive valuations and anticipated credit cycle returns, GSAM found.

CIOs reported no changes in governance, but did say they had enhanced communication and collaboration. Siegel said they “sped things up.” There was more dialogue, with monthly meetings becoming weekly and weekly meetings transitioning to daily check-ins. This allowed insurers to be nimble and make quick decisions.

CIOs said they believe the movement from public to private investments will continue. Siegel said the benefit is picking up an illiquidity premium—they get a higher yield or expected return in exchange for liquidity. “Private investments are not subject to a run, not subject to withdrawals. They are very stable,” he said.


The GSAM survey found an increase in insurers using ESG as one of several considerations in investment selection—from 28% in 2017 to 70% in 2020. Similarly, those that reported ESG is not a consideration fell from 68% in 2017 to 21% in 2020. Nine percent of respondents indicated it is a primary consideration.

The primary motivation for ESG considerations is portfolio risk mitigation, cited by 27% of survey respondents. This was followed by board of directors/corporate directives (19%) and shareholder/creditor considerations and customer considerations (15% each). The majority of companies, however, said they had hurdles to implementing ESG strategies. Sixty-nine percent cited access to reliable standardized data. Siegel said companies need to be able to define and measure ESG metrics, adding that “it can’t just be a gut level feel.” He says there needs to be a creation of standardized data and an understanding of the data.

Interestingly, firms in the Americas were least likely to apply dedicated ESG investments in their portfolios compared to companies globally.


ETF adoption by insurers continued to increase, with more than half (56%) of insurers in the Americas using them.

There is a greater use of equity ETFs than fixed income ETFs globally; however, in the Americas, 18% of respondents reported they use equity ETFs, 14% use fixed income ETFs and 24% use both.

GSAM said insurers that invest in fixed income ETFs most commonly use the allocations for short-term tactical measures and/or operational efficiency.