NEAM Insights

In June, for the second year running, NEAM Limited conducted its annual Lloyd’s Syndicate Investment Survey. In this article, we review the key investment trends for Lloyd’s syndicates as indicated by our survey respondents, examine these trends in the broader insurance sector context and highlight important considerations for Managing Agencies for the remainder of this year. Read More

CMBS transactions have been in the crosshairs of COVID-19 given the pandemic’s direct impact on commercial real estate. The retail and hospitality sectors have been significantly affected as a result of forced closures and reduced travel. Social distancing efforts have reduced the ability of organizations to conduct office operations, and many companies continue to implement work from home procedures. Read More

Introduction In May 2020, the Prudential Regulation Authority (“PRA”) released its supervisory statement SS 1/20 Solvency II: Prudent Person Principle (“SS 1/20”), which applies to all UK Solvency II firms, including Lloyd’s and its managing agents. The Prudent Person Principle (“PPP”) is fundamental to firms’ investment governance and operations, thus demanding the close attention of both the board and senior management. Read More

As we began 2020, the U.S. economy was on sound footing, albeit sporting an annual budget deficit of roughly $1 trillion. Now as we approach mid-year, the unemployment rate stands at ~15% and the deficit is set to explode to ~$4 trillion (and quite possibly higher) resulting from the massive economic rescue and support programs introduced to stem the economic dislocation caused by COVID-19. Read More

In previous writings,1 NEAM has called the insurance industry’s attention to the FHLB program. The benefits of the program are numerous and in these uncertain times, even more relevant. Insurance companies’ invested asset pools are not immune from the financial crisis being inflicted by social distancing measures taken to stem the spread of COVID-19. In times of market stress, characterized by increased volatility and declining asset prices, the ability to source another avenue of capital (albeit secured) without having to sell assets into dislocated markets can be advantageous. Read More

We choose the topic of Goodwill for this Perspectives for several reasons. First, for insurance organizations which are Generally Accepted Accounting Principle (GAAP) filers it represents a component of reported equity. Second, the Coronavirus-19 and recent capital market volatility will adversely impact insurers’ GAAP and statutory operating results and capital positions. And third, the Financial Accounting Standards Board (FASB) comment period on the current goodwill accounting framework has expired and results are pending. Read More

Unicorns rate highly among young girls and with good reason – they represent magical wonder, miracles and enchantment. Emotionally, they beckon you to believe in their existence and that anything is truly possible. In the financial markets, the term is used to classify private, venture backed startup companies valued at over $1 billion, effectively embodying this same sense of magical wonder and infinite potential. Read More

As we turn the calendar to a new decade it took all of 2 days for the geopolitical risk meter to spike higher with the assassination of an Iranian military leader. The global capital markets are currently being confronted by a number of geopolitical and macro factors: What will be the long-term impact of the China/U.S. trade issue on global trade? Will the UK be able to negotiate a trade deal with the EU by the end of 2020 for a smooth exit? Will military conflict with Iran escalate further? Will a spike in oil prices be the catalyst for the start of the next recession? Last but not least, 2020 brings an election year in the U.S. In other words, uncertainty reigns. The Global Policy Uncertainty Index (Chart 1) has spiked to levels not seen in prior crises such as 9/11, the 2008 financial crisis and the 2013 U.S. government shutdown. Uncertainty on issues such as trade impacts investment decisions and freezes business activity. Companies invest less and hire less. The question becomes how best to position insurance portfolios for these uncertain times? Let’s start by looking at the hard facts. Read More

In this Perspectives, we explore the realignment of insurance product portfolios and the asymmetric behavior of asset returns and property/casualty underwriting margins on both asset allocation and enterprise outcomes. We find realigning insurance product portfolios can favorably impact enterprise results. Further, product realignment can enhance the earnings contribution of asset reallocation. Read More

Introduction 20 months ago, Lloyd’s issued new guidance to limit members’ use of Tier2 capital.1 With 12 months remaining until full implementation is required in December 2020, this guidance has already materially changed asset allocation for Funds at Lloyd’s (FAL). Read More