Investing in Insurance Liabilities for Insurers - Industry Report

Why do insurers have an advantage when it comes to investing in Life and P&C insurance liabilities? We examine in a report with Intelligent Insurer on Insurance-Linked Investments.
May 01, 2022
Investing in Insurance Liabilities for Insurers - Industry Report
Investing in Insurance Liabilities for Insurers - Industry Report

Insurers have a big advantage when investing in life and P&C insurance  liabilities, as they understand the nuances and complexities of insurance  risk—which is why more are reaping the rewards of investing in a growing  non-catastrophe insurance-linked investments market. Rob Hauff, portfolio  manager for alternative reinsurance and investment platform Vesttoo,  examines the pros and cons of such a strategy. 

The growth trajectory of non catastrophe life and P&C  insurance-linked investments has  been particularly steep in recent years,  and the use of these instruments has  revolutionized the re/insurance market.  

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Yet while most of the biggest insurers  and reinsurers use these instruments  to discharge risk, the asset side of their  balance sheets has been slower to  absorb it as an investor.  

That is now starting to change, especially  as the nature of the risks being transferred  is broadening. While the market remains  dominated by instruments transferring  binary, catastrophe-focused risks to  investors, an increasing volume of high  frequency, low severity life and P&C  insurance liabilities is opening the door  for a new asset class offering more  consistent returns over time.  

This is a relatively untapped volume  of opportunity for the capital markets,  which could be sizeable and provide  an interesting diversification play for  a number of new and old investors,  including insurance companies.  

As Rob Hauff, portfolio manager for  alternative reinsurance and investment  platform Vesttoo, explains: “The  insurance industry is a perfect fit for  somebody already speaking that  language. Insurers have in-house  expertise—a resource that can be  helpful in explaining structural nuances,  regulatory issues, underlying risk, and  the strategic rationale for transactions.  

Download the full report here

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