Insurers are increasingly pessimistic about investment opportunities and wary about everything from an economic slowdown to credit and market volatility, a new Goldman Sachs Asset Management industry survey has found.

The majority of insurers surveyed—63 percent—said they see investment opportunities as getting worse. Respondents based in Europe, the Middle East and Africa are even more pessimistic, with 73 percent saying they see investment opportunities worsening in the face of factors such as sovereign yields in Europe moving deeper into negative territory.

GSAM said that respondents are worried about slower U.S. growth will impact them. But industry concerns move well beyond U.S. territory.

“They are also concerned about the unanticipated impact China and Russia can have on global financial markets,” the report noted. “Deflation has returned as a concern due to the impact of lower oil prices and slower global growth.”

This leaves insurer market outlook fairly tempered, GSAM said.

“After rates moved lower in 2014 contrary to expectations, most insurers do not anticipate a meaningful rise in rates in 2015,” the report stated. “The majority of survey respondents believe the 10-year U.S. Treasury yield will be between 2.0-2.5 percent at year-end, while almost one-third believe it will be between 2.5-3 percent.”

Among other findings from the GSAM Insurance Asset Management Survey:

• One-third of insurers said they believe we’ve entered the late stage of the credit cycle with deteriorating credit quality.
• One-third of insurers globally want to increase their overall portfolio risk, even as credit spreads continue to tighten and equity markets keep moving higher.
• EMEA and Pan Asian insurers have the strongest risk appetite this year.
• EMEA and Pan Asian insurers plan to diversify into U.S. investment grade corporates as they face low to negative sovereign yields.

GSAM’s survey—dubbed “Too Much Capital, Too Little Return”—took place from Feb. 3-25, 2015. It included property/casualty, multi-line, reinsurance, life and health insurers. Out of 267 responses, there were 208 CIOs, 48 CFOs and 11 executives who served as both CIO and CFO, GSAM said.

Source: Goldman Sachs Asset Management