Investment performance has become the number one concern for many insurers in the wake of the financial crisis and amid a changing regulatory environment. Swiss Re’s latest sigma study “Insurance investment in a challenging global environment” cautions that a low yield environment coupled with tighter regulatory standards could hamper insurers’ investment returns, leading to lower profits for the industry and higher rates for policyholders.
The financial crisis has created a new, challenging environment for insurance investment managers. In its aftermath, government bond yields have reached historically low levels that may persist until the global economy truly recovers. Changes in regulatory standards such as mark-to-market accounting and heightened risk charges on certain asset classes could lead insurers to invest more heavily in low-risk, low-return assets.
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