Asset Management

In the aftermath of 2008’s Great Financial Crisis, interest rates were cut to unprecedented low and negative levels. At the time, many questioned whether this would inevitably lead to high inflation in the short or medium term. However, to the surprise of many economists, the level and volatility of inflation rates seemed to defy gravity for over a decade. As a result, investors, analysts, and other market participants scaled back the magnitude and frequency of low probability risk events in their models. This was a mistake.

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Rising interest rates and the weakened economy have made public fixed income attractive to property and casualty insurers, who are shifting away from alternative assets to play in their comfort zones.

Insurers should brace themselves for much more volatility in the investment markets for the foreseeable future and will likely need creative solutions to improve their returns.

Insurance asset owners are hopeful that challenges like rising inflation and political instability will not lead to a deep recession in 2023.

Few people in Chile would argue that the country’s pension system is perfect. But even fewer seem to agree about how exactly the reforms should go.

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Low interest rates and market volatility have pushed insurance asset managers into less familiar territory during the pandemic. Though appetite for alternative asset classes and responsible investing seems here to stay.

In September 2013, Chicago’s city council and then-Mayor Rahm Emanuel adopted a building energy benchmarking ordinance that aimed to raise awareness of energy performance as well as unlock energy and cost saving opportunities for businesses and residents. The ordinance, which was fully phased in by 2016, calls on commercial, institutional, and residential buildings larger than 50,000 sf to track whole-building energy, defined as the usage of electricity; natural gas; and any other fuels to operate both common and tenant-occupied spaces. The ordinance requires information to be reported to the city annually and verified every three years by a licensed in-house or third-party professional. The law covers less than 1% of Chicago’s buildings according to Chicago.gov, but roughly 20% of total energy consumed across the city. While the ordinance does not currently require building owners to make mandatory investments, a 2019 energy benchmarking report published in April 2021 revealed $24.6 million in annual energy reduction savings between 2016 and 2019 (approximately $74 million in total) and a 15% decline in carbon emissions per building sf over the period.

Inflation concerns are highest in decades.

As the world’s eyes turn to Glasgow where COP26 is upon us, insurers are evermore expected to lead on climate and sustainability.

More insurers are investing in private assets, partly because bonds offer such meagre returns. But they need to consider the risks involved, as well as the opportunities.

New investors are now looking at high frequency, low severity life and P&C insurance assets  to earn additional spread on their existing assets.

The SSAG model provides a sector allocation framework.

With an ever-tougher regulatory and low interest environment, insurers need to step out of their comfort zone and diversify bond holdings beyond their own domestic markets.