NEAM Insights

Impact on Portfolio Optimization? The National Association of Insurance Commissioners (NAIC) presented a proposal of new risk-based capital (RBC) charges for C1 investment risk in 2015. This proposal also introduced additional granularity of fixed income credit rating reporting, from six to twenty categories. Although the current proposal focuses on life insurers, NAIC has stated that the proposed structure of twenty rating categories would also apply to health, and property and casualty insurers. The numeric values of the respective C1 factors might vary by industry segments. Read More

Many articles discuss enterprise risk management (ERM) and provide compelling reasons to establish and measure risk preferences. Some say that an effective and prudent enterprise risk and capital management process requires a well-articulated risk appetite framework. But, how does one define what that risk appetite should be? Read More

Rumor is that taxes might fall and interest rates might rise further, leading one to ask, “Now, what do I do?” We advise: that depends on you, how your current portfolio is constructed and your definition of success. In this Perspectives, we assess the potential impact of a decline in corporate tax rates and rising interest rates on asset allocation and earned investment income, relying on industry aggregates as a representative company proxy. Read More

In this issue of Perspectives, we review trends of the Schedule BA investments of the U.S. insurance industry and compare those investments across the Property/Casualty, Life, and Health segments. Read More

The focus of this issue of Perspectives is to determine whether these regimes, each with different standards and capital adequacy metrics, develop different relative investment capital charges when applied to individual insurers.1 For example, when contrasting the 10 or 25 most (or least) intense capital consumers, are they the same organizations or are they ranked differently across regimes? Read More

While the earned rates for life insurers are relatively straight forward, the paid or credited rates may warrant further discussion. Life insurers are subject to minimum interest rate guarantees, both explicitly and implicitly, for long-term insurance contracts. Read More

Our recent Perspectives focused on 2015 property/casualty insurers’ investment highlights and led us to reach the following conclusion: It is to an insurer’s advantage to adopt an enterprise capital management approach to optimizing asset allocation which encompasses a more complete integration with enterprise risk appetite and tolerances, a comprehensive vetting of investment guidelines and consideration of capital structure and management. Read More

In this issue of Perspectives, we review statutory operating and investment results for the U.S. life insurance industry over the last decade. Portfolio details focus on fixed income sector trends and market statistics (durations, yields and NRSRO ratings), which are maintained by NEAM in a proprietary database and are not publicly available. Read More

In this Perspectives, we focus on 2015 investment results and key operating metrics for the U.S. property - casualty insurance industry. This is our 16th consecutive year of producing two annual industry publications. The first report highlights overarching trends. The second, builds upon these trends by providing a range of prospective returns and identifying steps to enhance future results in light of current market conditions. Read More

Life insurers traditionally follow an asset liability matching or management (ALM) approach to construct their investment portfolios. This ALM framework is a bottom-up process in which assets are segmented to support specific product liabilities. This issue of Perspectives introduces a top-down asset allocation approach (Enterprise Based Asset Allocation™ or EBAA™process) and illustrates how life insurers can adopt this holistic approach to potentially improve their investment portfolios’ risk-adjusted returns beyond the levels derived from the traditional bottom-up ALM approach. Read More