In an investment environment characterized by strong global liquidity, insurers continue to battle the low-yield environment while preparing for rising interest rates and greater market volatility.

Executive Summary

Insurers are making changes to their portfolios to enhance portfolio yields. But rather than increasing credit risk or duration, they're more apt to boost allocations to less liquid assets, according to a first-quarter 2014 survey of CFOs and CIOs by Goldman Sachs Asset Management. P/C insurers favor allocating to equities and alternatives in pursuit of higher returns, the GSAM survey reveals.

In early 2014, we conducted our third annual Goldman Sachs Asset Management (GSAM) Insurance Survey representing insurers with more than $6 trillion in global balance sheet assets. This article highlights the insights provided by the survey regarding the macroeconomic environment, investment returns, asset allocation and portfolio construction.

According to the survey, chief investment officers are most concerned about the potential for greater credit and equity market volatility, accelerated monetary tightening, slower than expected U.S. growth as well as economic shock in the emerging markets and China. P/C companies surveyed expressed particular concern about inflation, with nearly 40 percent identifying inflation as a top macroeconomic risk.

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