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Strategic Asset Allocation (SAA) for Insurance

Determine the optimal asset allocation while taking into account your risk tolerance, investment return objectives and insurance business specificities
Designed to meet the strategic objectives of management while keeping shareholder and policyholder interests at heart

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

Looking to optimize your asset allocation?

How does it work in practice?

Target SAA determination – the process:

 

 

Visualizing the optimal allocation – an example:

Key Features

  1. 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.
  2. 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.
  3. 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

13 Jul, 2021
Understanding European Taxonomy and its impacts on the European Markets

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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29 Jan, 2021
A Practical Guide for Insurers to Incorporate Climate Risk in Their Own Risk and Solvency Assessments (ORSA)

Climate change poses a serious risk for society and for (re)insurers, with the harmful impact of global warming already being visible. Without further international climate action, global average temperatures and the associated physical risks will continue rising, resulting in increased underwriting risk of insurers, impacting asset values, and challenging their business strategies. On the 5th October 2020, the EIOPA has published a consultation paper on the use of climate change risk scenarios in the ORSA in the form of a draft supervisory Opinion. The consultation is a follow-up to the Opinion on Sustainability within Solvency II released in September 2019 which recommended that (re)insurers should consider climate risks beyond the one-year time horizon within their system of governance, risk-management system and ORSA.

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