Half of insurance company executives see the U.S. entering a recession in the next two to three years and credit quality deteriorating, but they still have a zeal to increase credit risk, according to Goldman Sachs Asset Management’s 13th annual global insurance investment survey.

The survey of 359 global senior investment and finance professionals in the insurance industry shows 50% believe the U.S. will enter a recession in the next two or three years, although that sentiment varies by region. For example. among insurers based in the Americas, 58% of respondents display that level of pessimism, while only 41% of those based in Europe, Middle East and Africa express that sentiment.

Globally, 16% of respondents believe the U.S. will enter a recession before the end of 2024. In last year’s survey, 20% of respondents expected a recession in the U.S. before the end of 2023.

Inflation remains a concern, with 63% of respondents saying they believe the period of heightened inflation risk will last two to five years. Seventy-six percent of respondents expressed that sentiment last year.

The survey also shows that 59% of respondents are concerned the credit cycle is entering a later stage, but 35% of respondents are still looking to increase credit risk.  When asked which five asset classes they expect to have the highest total return over the next 12 months, 53% of respondents said private credit will be in the top five.

Greg Olafson, global head of private credit at GSAM, said in a March 25 interview: “It’s a pretty good place to hide earning double-digit returns for first-lien risk, so that’s what I think explains the results. Insurers think they will get strong returns, but especially strong risk-adjusted returns.”

Olafson said insurers provide a stable and durable pool of capital, and “they should look to protect principle and compound returns, and I think that is why they are a natural provider of the capital to this strategy (private credit).”

Read more @pionline