Strategic Asset Allocation (SAA) for Insurance
SAA takes a long-term planning perspective and it is the asset allocation that is expected to be effective in achieving the insurer’s investment objectives, given pre-defined investment constraints and risk tolerance. Determining the optimal SAA is a complex multistage process that involves the collaboration of multiple internal functions (Asset Management, ALM, Risk) and must account for the interests of external stakeholders (shareholders, policyholders, regulators). Finalyse combines an academic perspective with a practical approach to the definition of the target SAA, helping insurers manage this balancing act along each step of the process.
How does Finalyse address your challenges?
Development and implementation of an SAA optimization model and calculation engine
Design and implementation of an end-to-end process for the definition of the target SAA
Integration with capital planning, balance sheet management and the Risk Appetite Framework
Alignment with regulatory requirements (e.g., ORSA and the Standard Formula Appropriateness Assessment)
Modelling of the Best Estimate Liability cash flows and their relationship with asset cash flows
Design of derivatives hedging strategies for managing DV01 and CS01
How does it work in practice?
Target SAA determination – the process:
Visualizing the optimal allocation – an example:
Key Features
- A properly defined SAA is crucial for managing the insurer’s solvency and liquidity risks, while generating returns sufficient to meet policyholder pay-outs and maximize shareholder wealth.
- Given the ever increasing regulatory scrutiny in the context of the European Solvency II framework, the SAA must respect the fundamental guiding principles and accepted market practices.
- Finalyse offers extensive experience and expertise on both the asset and liability sides, which provides the necessary scope of knowledge and skills to help determine the SAA that is optimal for your business.
Our subject matter experts
Frans is an actuary and Financial Risk Manager with international experience in the pensions and insurance sectors. He has been specialising in climate change risk management, actuarial valuations (AXIS), financial reporting (IFRS17, IAS19), regulatory reporting (Solvency II, ICS, IORP II), market risk management (ALM, SAA) and investment consulting.
François-Xavier is a Principal Consultant with advanced expertise in Financial Markets, ALM and Risk Management, covering both banks and insurance companies. On the banking side, François-Xavier is a practice leader on Valuation, IRRBB, FRTB, VaR, Initial Margin and Counterparty Risk, well acquainted with the regulatory requirements and the market practices surrounding market risks. On the insurance side, François-Xavier has extended experience in the regulatory treatment of financial instruments, ORSA, and hedging balance sheets against interest rate, credit spread and inflation risks.
Stéphane is a senior consultant with proven skills in credit and market risk (including FRTB) and extensive knowledge of financial markets. He is a subject-matter expert in IFRS 17, Basel II, Basel III and Solvency II,. His field of competence also covers Strategic Asset Allocation (SAA) for insurers. Stéphane has been involved in the implementation of IFRS 17 for many insurance and reinsurance companies in Europe and North America. He is an active member of the Finalyse IFRS 17 Centre of Excellence, where he has been leading the development of the Finalyse IFRS 17 calculation and reporting tool.