Towers Watson survey highlights investment risk for insurers

A recent survey of 16 equity analysts by Towers Watson discovered that the property and casualty insurance industry should take a “moderate degree of investment risk” in current economic conditions to bolster returns.

The poll, which was designed to gather insight from investment analysts specializing in researching p&c companies, found “there was a recognition that in the current very low yield environment, some investment risk may need to be taken if there is an aspiration to provide for returns closer to historical levels.”

In its report, Investment Unwrapped for the P&C Insurer, “the nature of the liabilities and the solvency position are the two main factors that should influence the level of investment risk,” Towers Watson notes.

“The nature of the liabilities was the most popular response (from analysts), backing up the overarching view that the assets should be there to back the liabilities and underwriting activities, and not act as the primary driver of return,” the report states. “The greater the uncertainty in the liabilities, then the lower the level of investment risk.”

In terms of asset allocation, Towers Watson adds “there is strong support for making the assets match the liabilities as far as possible, and for diversifying the investments across asset classes and geographically.”