Market volatility and uncertainty has put pressure on insurers' cash positions - alternative asset classes can offer a more attractive risk-return profile.
Market volatility and uncertainty has recently put a lot of pressure on insurers' cash positions, with increasing margin requirements for interest rate swaps only further complicating the situation. Managing cash allocations, to provide an effective balance between generating a return on investments and risk, whilst also respecting short-term liquidity and collateral requirements thus continues to be a major challenge. As a result, many insurers are currently reviewing the effectiveness of their cash and liquidity policy.
We address three key topical questions for insurers in the current market environment:
- Does my current cash allocation meet my investment goals?
- Can I allocate more to higher yielding assets to avoid a cash drag?
- What alternative asset classes can offer me a more attractive risk-return profile?