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About the Insurance Investment Exchange

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A new way to share knowledge, insight and understanding in a challenging insurance investment environment.

Today, asset-liability management (ALM) is paramount like never before for insurance companies. The macroeconomic and regulatory environment presents many challenges. The financial crises of recent years coupled with the wide-ranging fiscal and monetary initiatives undertaken by governments have created uncertainty. Further, sweeping regulatory changes in the insurance market will have an unprecedented impact on the way insurance companies act and behave.

In Europe, the incoming Solvency II regulation will uncover balance sheet volatility across the board, encourage board level debate of all risks and impose an increased requirement to fund sufficient capital to protect policyholders’ interests. Some of this has already begun to happen as national regulators in some countries gear up and issue interim half-ways houses. The sheer size and importance of the European market will ensure that these changes will ripple outwards and have tremendous impact on profitability.

The stringent requirements imposed on insurers will lead them to assess the securities they invest in and how they are managed requiring professional expertise to manage the risks and to achieve the desired returns. This is a sea change from the old world where Insurance companies were traditionally far more focused on their liabilities than their assets. The status quo of a static long-term strategic asset allocation, largely centered around maximising yield, is increasingly a flawed approach and will no longer work going forward under the changes taking place.

Given this dynamic and challenging investment environment, insurance CIO’s, CFO’s, CRO’s and Chief Actuaries need to better understand the implications that these changes will have on their investment portfolios and how they can best exploit the opportunities and avoid the pitfalls. This will require a significant shift towards a more dynamic assessment of risk, return and capital. Alongside, various “new” asset classes, strategies and instruments will become part of the toolkit as insurers look to innovate solutions.