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Streamlining Alternatives Portfolio Management in Insurance Asset Management

By June 2, 2021 No Comments

The new normal of near-zero interest rates is largely here to stay and, while inflation pressures could show a potential interest rate movement, this means increased asset liability management and asset allocation pressure for insurance providers. With this, current investment allocations to private equity, private debt, CLO managers and hedge funds will need to increase in order for insurers to manage the asset/liability mismatch and optimize their models effectively.

Due to the fact that operating platforms in insurance asset management have traditionally lagged in transparency, efficiency and data insight for new and complex asset types, many are beginning to move forward with their transformation to a “future state” operating platform. However, there are three important change factors to consider before doing so:

 

  1. Impact of Industry Trends
  • Continued increase in asset/liability mismatch requires increased allocation into alternative assets managed internally or outsourced to specialists
  • Ensuring regulatory compliance while increasing these allocations will require increased data transparency and tracking
  • Non-investment teams need to be able to support complex portfolios, which could affect current decisions about software and services providers
  1. Increasing Investments in Operations Technology
  • Higher investments required to digitize operational workflows with RPA tools that can reduce costs and improve transparency
  • Leveraging specialist outsourcing providers for operations and risk technologies
  • Developing new allocation models for complex portfolios that require specialized data for alternate portfolio vintages as well as specialized structured credit data and alternate data
  1. Improving Data Maturity
  • Establishing a data strategy to improve portfolio management of internally and externally managed alternative assets
  • Improving transparency and governance for complex assets that affect risk and regulatory processes
  • Harmonizing reporting from alternative managers with fixed income portfolios to provide asset liability insight for investment teams
  • Leveraging cloud-based platforms to bring economies of scale to analytics and data science pipelines, creating a way to leverage AI in the future

IVP Consulting Services offers specialized expertise for leading insurance asset managers in the transformation of their operating and data platforms. Learn how by contacting us at sales@ivp.in.

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