Can Insurers Relax While Central Banks Unwind?
After almost a decade of monetary stimulus, central banks are starting to unwind quantitative easing. Insurers therefore need to begin adapting their investment approach for the gradual return to increased interest rates and bond yields. The most successful insurers will be nimble and look to adjust their investment approach to allow for these higher interest rates, but will also ensure that their internal governance and investment risk frameworks are robust enough to deal with the inevitable shocks that will arise. To this end, the global Mercer Insurance Investment Team has identified 10 investment ideas that we believe will aid in the successful management of an insurer’s assets in 2018 and beyond.
Prepare for further interest rate rises and reduction in QE.
Agree and implement investment beliefs.
Ensure the investment operating model is fit for purpose.
Integrate ESG considerations into investment decisions.
React to regulatory changes.
Ensure fee efficiency to maximize net return.
Investigate developments in asset class risk premia.
Prepare for the late credit cycle and associated shocks.
Benefit from a move from public to private markets.
Proactively make decisions to enhance returns in challenging environments.