The insurance business model is fundamentally based on underwriting and managing risks: insurance companies are contractually bound to meet specific obligations and as such structurally driven by liabilities.
The unchartered market environment experienced in the last few years, exacerbated by the introduction of the new Solvency II regime, has acted as an additional catalyst, leading even the most reluctant insurers to ac- knowledge the need for a holistic approach to their balance sheet. Insurance asset managers have therefore started to develop tools deployable at different stages of the investment value chain to face such a transformational framework.
Adjusting for the relevant regulatory setting and specific circumstances, this tool kit – initially designed to meet requirements specific to insurers only – can be significantly impactful in the way other Liability-Driven investors select and manage their assets.
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