Over the past decade, investors have operated a massive shift from actively managed strategies into passive ones. For insurance companies, the move towards passive has often been encouraged through their strategic asset allocation processes typically using common equity indices as a benchmark.
Insurance investment today is challenging, thanks to a confluence of low yields, growing regulatory requirements and increasingly diverse balance sheets. New assets, strategies and partnerships have the potential to help insurers cut through this complexity and deliver sustainable solutions.
Interest rates have fallen to historic lows. Volatility within equity markets has risen. And geopolitical risk continues to be the catalyst for global market sentiment. So, how should insurers adapt their investment strategies to overcome these challenges, particularly in the face of tougher regulation?
Central banks should stop pandering to market expectations and escape the 'hall of mirrors' that this creates. That's the central theme of Expected Returns 2020-2024, our latest five-year outlook for asset classes, macroeconomic themes and other vital issues for investors.
Holding asset-backed securities has been a challenge for most insurers since the dislocations of the global financial crisis and introduction of Solvency II. This year, new regulation offers the potential for Solvency II-regulated firms to return to securitised debt investments, says James King, fund manager at M&G.