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June 2016 – Boldly going where no insurer has gone before: New approaches to asset allocation

Posted July 14, 2016

This year has been a powerful reminder to investors that volatility is ever present beneath the surface and that normalcy is still a distant goal. Alongside, regulation marches on as policymakers continue to fret about financial stability. But none of this is new. We are nearly a decade on from when the financial crisis first reared its head and the traditional foundations of insurance portfolios began to dissipate. The result has been a near lost decade of yield and a punishing education in regime change management.

The mean return today for the traditional insurance portfolio of yesteryear, heavy in sovereign and investment grade fixed income, is close to zero in real terms with an overlay of unpredictable volatility, as macro concerns dominate. Solvency II has also emphasised and delineated the basis risk that exists between liabilities and assets, which can no longer be ignored. Both are unsustainable and unacceptable from investor and business standpoints. The implication is a sea change both in insurance culture as well as in asset allocation and risk management.

But Solvency II has also unshackled insurers from their reliance on yield. Risk based capital means a wider palette of options, as long as capital efficiency and shareholder returns are met. Insurance balance sheets have begun their long journey towards ever greater complexity, much as banking balance sheets did 30 years ago. That brings new challenges, new opportunities and new risks to the table.

Our second event of 2016, Boldly going where no insurer has gone before: New approaches to asset allocation, focused on the growing importance of asset allocation and portfolio construction, as insurers seek to create portfolios that enhance shareholder returns in today’s muted environment whilst remaining still economically robust and capital efficient.

View the Event Programme as well as all the presentations:

June 2016 Event Programme

Keynote

Macro matters – Fighting complexity with complexity, Dr Bob Swarup, Camdor Global

Breakouts

Investing to beat liabilities, Mark Versey, Aviva Investors

Managing your SCR: from alchemy to chemistry through the use of dynamic volatility control, Emmanuel Bourdeix, Natixis Asset Management

Asset strategy for matching adjustment business challenges and choices, Craig Turnbull, Standard Life Investments

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