Keeping pace with the complexities insurers face

2 min read 3 Jul 24

In a higher for longer interest rate environment, insurers are reassessing their investment allocations to ensure alignment with their return objectives, risk tolerance and liability profiles. While private asset allocations continue to grow, optimising strategic asset allocations and meeting regulatory requirements is in sharp focus. Insurers’ service requirements are intensifying, as a result. This relies on sophisticated investment modelling – built on comprehensive infrastructure. 

Supporting robust asset allocation decisions

Given the long-term nature of insurance liabilities, a well-structured strategic asset allocation is crucial. As an experienced asset manager for our internal insurance client, and third party insurers globally, we recognise the sophistication of investment modelling that this requires. To this end, we have formed a strategic partnership with market-leading service company, Ortec Finance. This partnership enables us to leverage Ortec’s advanced Economic Scenario Generator, Strategic Asset Allocation, and Climate Risk tooling, further strengthening our client service capabilities.

M&G’s £17 billion third party Insurance Solutions business designs tailored, capital-efficient investment strategies to meet the complex needs of global insurance companies, working directly with each insurer to quantitatively highlight the risks and benefits of various investment strategies within the context of clients’ risk-return objectives and overall balance sheet positions.

The integration of Ortec’s advanced modelling techniques enables us to support robust asset allocation decisions through enhanced risk management capabilities, which factor in insurance-specific metrics in the modelling process. In turn, we are able to tailor investment strategies to the bespoke needs of clients.

As a product, optimal asset allocations with select private assets exposure can help insurers to reduce portfolio risk through diversification, and improve capital efficiency - crucial for insurers navigating the complexities of today's financial landscape.

Providing the solution insurers require

Alongside strategic asset allocations, a key consideration for insurers is meeting complex regulatory requirements and the increasing need for frequent and efficient reporting. In response, M&G has also bolstered its operational infrastructure in this area through a separate partnership with Clearwater Analytics. The Clearwater platform automates regulatory reporting, and provides M&G’s clients with up-to-date information and a consolidated view of their portfolio investments. Access to best-in-class technology and workflows also provides the flexibility to address unique reporting challenges across different regulatory regimes, supporting our global insurer base.

“We recognise the importance of enhancing our platform’s capabilities to provide robust, technical solutions that keep pace the complexities our clients face,” says Russell Lee, M&G’s Head of Insurance Solutions. 

“These enhanced capabilities allow us to further expand our Insurance Solutions footprint in markets that are seeing strong growth in insurance and reinsurance, providing clients with access to M&G’s actively-managed public fixed income and private markets investment capabilities,” he continues.  

“By combining deep expertise with comprehensive infrastructure, we can add value through tailored, capital-efficient investment strategies that ensure optimal asset allocation in today’s market environment, alongside efficient reporting.”

The value of investments will fluctuate, which will cause prices to fall as well as rise and investors may not get back the original amount they invested. Past performance is not a guide to future performance. The views expressed in this document should not be taken as a recommendation, advice or forecast. 

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