Capital-efficient investing for Property and Casualty insurers

Today’s investing environment is a challenge for all Property and Casualty (P&C) companies. With the expectation of “lower for longer,” now is a good time for companies to make sure they have an investment framework to help guide them, not just through this period but in any market environment. 

Choosing between low rates and tight credit spreads can feel like being stuck between a rock and a hard place. Add being in a regulated environment and things can be even more challenging. 

In this article we examine what P&C companies are doing with their portfolios, how they can adopt a “risk-budget” framework to improve investment decisions and how to look at some of the investment tools available. 

Every insurer has their own risk tolerances, objectives and capabilities so there is no magic bullet to designing an investment strategy. Our aim is to help them understand the trade-offs between expected return, portfolio allocations and capital charges.