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.
What Finalyse experts say
This article introduces the reader to the taxonomy regulation. The taxonomy regulation is intended to identify the investments, that are contributing towards the EU climate goals as expressed in the European Green deal. Against the backdrop of COVID 19, it is very likely that the taxonomy will serve as an important funnel for the stimulus/recovery money. However, given the strictness of the EU plans it is likely that the investments that qualify under taxonomy will be supported even further in the future, whereas the investments that do not may experience some adverse treatment. The taxonomy, therefore, is an important glimpse to the future. Read this paper in order to find out more about the basic principles underpinning the Taxonomy.
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