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Insurance Asset Management Industry Part II: Allocation and risks

Allocation, ESG and Tail Risk Implications for Insurers

Just a few weeks ago, we wrote about issues and opportunities within the insurance asset management industry. And now we're back for part two, with some additional updates and considerations.  

Below you'll find further insight into industry-wide concerns such as climate change risks and ESG integration, as well as suggestions related to asset allocation for insurance asset managers. How should insurers view tail risk events after experiencing a COVID-19 shock earlier this year? Moreover, what will the long-term effects be for cross-asset correlations, and how will these ongoing relationships affect allocations going forward? 

insurance asset management

Why is Consumer Debt Attractive for Insurers? (M&G Investments, Jul 2020)

For compliance reasons, this paper is only accessible in certain geographies

M&G Investments suggests that insurance investors should consider the merits of investing in the consumer finance sector, as it has several attractive features, especially for those insurers subject to Solvency II.

Opportunities for Insurers in Asian Corporate Debt (NN IP, Jul 2020)

NN Investment Partners describes how there may be opportunities for European insurance investors to enhance book yield and maintain similar portfolio characteristics, such as credit quality, by diversifying into Asian corporate credit.

Could UK Superfunds Disrupt the Bulk Annuity Market? (Hymans Robertson, 2020)

For compliance reasons, this paper is only accessible in the United Kingdom

UK pension superfunds could provide an alternative for DB plans that would traditionally have offloaded liabilities to insurers. But to what extent will these actions affect the market for bulk annuities?

The Unique Climate Change Risks Facing Insurers (Robeco, 2020)

Robeco elucidates reasons why climate change is a threat to insurers' liabilities and assets. There is no industry that is more exposed to risk eminating from climate change than the global insurance industry.

ESG Considerations in the Insurance Industry (Milliman, 2020)

This Milliman white paper covers the selection of ESG investments, specific strategic concerns for insurers, ESG disclosures and other pertinent ESG considerations related to the insurance industry.

Practical Guide to Climate Change for General Insurance Practitioners (2020)

This paper breaks down the different types of climate change risk into three categories - physical risks, liability risks, and transition-related risks, and discusses how each type potentially affects general insurance practitioners.

Insurance Asset Management: Tackling the COVID turmoil (Jun 2020)

How has the insurance industry (and how have insurance asset managers) fared since the onset of the COVID-19 crisis? This report presents some valuable insight, as well as insurers' views on other issues such as ESG integration.

Asian Life Insurance: The $10 billion market opportunity (Oliver Wyman, 2020)

Oliver Wyman reviews Asian economic development and demographics, presenting the present-day opportunity set for life insurers in the APAC region.

The Stock-Bond Correlation (2020)

The authors shed new light on the stock-bond correlation in several ways, representing a method of viewing correlation that includes drift during the period under examination and new ways of predicting future correlations.

The Top 10 Cross-Asset Correlations to Watch (Qontigo blog, Jun 2020)

In this interesting blog post, Qontigo notes ten different correlations between asset classes and discusses both their historical relationship and their post-COVID-19 performance.

Tail Risk Hedging: Put vs trend strategies (AQR Capital Management, 2020)

In this paper, AQR looks at examples of risk-mitigating strategies and presents many of the strengths and weaknesses of different types of tail hedging strategies.

Creating Anti-Fragile Portfolios (Enterprising Investor blog, 2020)

This Enterprising Investor article discusses the nature of long versus short volatility and posits that an allocation to long volatility strategies could provide an answer for investors who are seeking less portfolio fragility.

Replacing the Protective Role of Bonds (Wellington Management, 2020)

Historically, some portfolios have allocated assets to fixed income investments due to their negative correlation to equities (and thus, their ability to protect portfolios against losses). But is this role changing, or are other asset classes more suitable for this need?

Where Do Institutional Investors Seek Shelter as Disaster Strikes? (2020)

What does the 'risk-off' trade actually look like within the equity market? This paper looks at institutional investor behavior during Q1 2020 for answers.

Webinar: Index strategies for unique risk philosophies (S&P Dow Jones Indices)

S&P Dow Jones Indices examines how three investment managers use index-based products to address their unique philosophies about risk and form them into strategies that are actionable.