On 24 June 2015, the OECD hosted a presentation and high-level roundtable for the launch of its Business and Finance Outlook in Paris.
Speakers at the roundtable discussions included Ignazio Visco (Governor of the Banca d’Italia), Klaas Knot (President of De Nederlandshe Bank), Larry Zimpleman (Chairman of the Principal Financial Group) and Antoine Lissowski (CFO of CNP Assurances). Twelve Capital’s Chairman and CIO, Urs Ramseier, participated as a panellist on the OECD’s roundtable discussing the challenges and risks that pension funds and life insurers are facing in the current economic environment.
Panellists discussed the potential implications of persistent low interest rates on insurers’ financial strength, particularly when assurances of guaranteed returns may have previously been made to policyholders. While acknowledging the headwinds that the sector will face, panellists highlighted possible solutions that insurers could look to in the current economic climate. Amongst them, a shift of product offering to defined contributions versus defined benefit plans and a push towards lower capital consuming products, where the investment risks are borne by policyholders, were highlighted.
It was also noted that low yields will impact insurers differently, depending both on where they are located and on the type of products commercially available. More generally, it became clear that the sector will need to increase the level of risk within investment portfolios, as government bonds will no longer be sufficient to generate the required levels of yield. Insurers will therefore need to develop an internal expertise in more illiquid and higher-yielding asset classes, or alternatively leverage the skills of specialist external investment managers.
Source: Twelve Capital
Friday, 26 June 2015