The Insurer Investment Management Insights

Our latest issue of the Insurer Investment Management Insights has just been published, keeping you in the know about the latest developments affecting the insurance industry.

In this publication, our experts examine the impact EIOPA will have on European Commission decisions and the efforts to include climate change risk into regulations. They also uncover various asset classes that could give insurers potential higher yields while providing a source of diversification.

How do the regulatory changes impact insurer’s asset allocations?

Delivered last December, the advice from EIOPA will strongly influence the European Commission’s thinking. Elizabeth Gillam, Head of EU Government Relations and Public Policy, explains how various aspects will impact the proposed changes, including the valuation of long-term liabilities and measures relating to long-term investments.

Despite the lack of consideration of climate change or sustainable investing in EIOPA’s Solvency II advice, the urge to integrate climate change risk into insurance regulations is gathering pace.

The return of returns?

In the face of a continuing low yield environment, Charles Moussier, Head of EMEA Insurance Investment Solutions, have identified various asset classes that could offer attractive returns while compensating the cost of their regulatory capital, among them emerging market investment grade debt and US municipal bonds which could also be considered as a natural fit for ESG investment:  

Emerging market investment grade debt for insurers:
Capturing yields while maintaining quality, capital requirements and an integrated ESG approach.

This paper reveals how Emerging Market Investment Grade Debt could help insurers capture higher yields, while maintaining credit quality and capital requirements.

In this low-yielding environment, Emerging Market Investment Grade Debt could offer:

1. A source of attractive long-term returns
2. A diverse asset class spanning over 70 countries
3. Strong diversification by company, sector and location
4. Attractive relative value versus developed market debt
5. A regulatory capital treatment where Emerging Markets hard currency investment grade bonds get the same rating category treatment as Developed Markets bonds
6. Increased Solvency II efficiency
7. Great opportunity for investors to drive change while integrating ESG considerations into their portfolio

Read the paper

US municipal bonds can be considered a natural fit for ESG investment
This paper explains how municipal bonds can help European investors meet ESG investment objectives while at the same time offering attractive yields and potential advantages under Solvency II. Because municipal issuers focus on social services and community-based projects, municipal bonds can be considered in many ways “a natural fit” with ESG investing. At the same time, taxable municipals can offer attractive relative value versus corporate bonds (even after hedging costs) and higher capital-adjusted yields compared to other types of bonds under Solvency II.

Read the paper