The Savvy Investor Insurance Companies section carries available academic research materials, thought-leadership pieces, and white papers which primarily focus on the asset management practices within the global insurance industry. There are also a limited number of insurance sector and outlook related content pieces on the broader insurance industry.
Insurance companies cover a range of different product and service offerings, from macro-scope accident and health, property and casualty, reinsurance, to micro-focused offerings covering insurance of life, automobile, home, flood, healthcare, etc. Within each of these elemental types of insurance, there are contracts, structured by underwriters which protect a policyholder against a future-insured risk...
In exchange for the contract [protection], the policyholder pays a premium to the company. If a successful claim is upheld, the company will indemnify the policyholder. Throughout this process, premiums are collected to form a ‘float’, which is bundle of assets that insurance companies can invest in. Through this, insurance companies build sizable investment portfolios.
An insurance company will use the assets under its control to manage its future liabilities (known as asset-liability management (ALM)). When yields on sovereign and corporate debt outpace inflation and provide a comfortable rate of return, the management of both future liabilities and the costs of doing business is fairly straightforward. However, monetary easing has propelled yields lower and lower in the developed world, resulting in a more challenging environment for asset managers, especially those within the insurance industry. This has pushed some insurers into other types of investments, such as lower credit quality bonds, equities, and alternative assets.
Additionally, liability-driven investment (LDI) policies can also involve hedging against specific risks, such as interest rate risk, currency risk, or credit risk using complex swaps and derivatives.
After the Global Financial Crisis, banks and insurance companies had to deal with a challenging regulatory environment that has entailed increased scrutiny, greater capital requirements, and substantial compliance costs. Many papers within this section of the Savvy homepage also discuss the investment regulations that are relevant for insurance asset managers, such as Solvency II.
Insurance Companies pertains to:
- Insurance services (life, social, guarantee, liability, fire, marine, property)
- Insurance products (vehicle, building, personal, animal, events, natural disaster, CFDs)
- Insurance policies (term, term with premium, unit-linked, endowments, moneyback, whole, group, child, retirement)
- Insurance practices (liability-driven investing (LDI), asset-liability management (ALM))
- Insurance regulation (Solvency II)