Our insurance clients, globally, have identified a number of the most pressing issues they face.
Firstly, most market commentators agree we are in the late stages of the credit cycle, and with 40% of investment grade yielding below 1%, insurers are facing a real dilemma in terms of finding the right balance between delivering secure income and preserving capital.
Targeting diversified sources of yield from both asset allocation and security selection suggests a multi-asset credit strategy should be core to insurers’ fixed income strategy in today’s “low-for-longer” environment.
Secondly, Insurers remain at the forefront of private markets investing. At this late-cycle juncture and with the asset class continuing to attract significant flows, insurers are not only finding it difficult to originate and implement deals directly but are deploying ever-increasing resources to maintain their private markets allocation. An alternative is to consider “directed implementation” – an approach that helps insurers achieve the right balance between retaining the key investment decisions in-house and accessing the technical, legal and operational resources provided by a third party platform.
Finally, as pressure from regulators and investors grows, the focus on responsible investment increases. Insurers face the additional challenge of balancing core business activities such as underwriting with an investment strategy that meets these demands.
Implementation can be complex, consuming significant resources and Mercer is well placed to help insurers navigate the reputational, operational and commercial difficulties of embedding a responsible investment approach into their investment strategy.
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