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Fixed income

Cash dethroned: reallocation opportunities for insurers under Solvency II

15 min read 28 Apr 21

By M&G Investments

Summary: Insurers continue to grapple with historically low cash rates and potentially high capital charges on some defensive assets under Solvency II.

We explore the potential options for insurers to step out of cash and into higher-yielding assets, including the expected trade-offs in liquidity and safety by reallocating a strategic portion of cash to short-dated gilts, credit or – a sometimes overlooked alternative – senior ABS.

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By M&G Investments

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.

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