Executive summary:
Seeking capital efficient solutions in
a low interest rate environment
The past decade has been a period of intense
challenge and change for the insurance industry.
In the aftermath of the worst financial crisis
in generations, insurers face the impact of
fundamental changes in solvency and accounting
rules combined with the uncertain outcome of
unconventional monetary policies adopted by major
central banks.
In developed economies, central banks are keeping
interest rates at historically low levels to support
the economic recovery, creating a shortage of
high-quality, high return fixed-income assets. This
environment has led insurers to review their asset
allocation and widen the range of fixed-income and
credit instruments they invest in.
Now the industry faces the fresh challenge
of adapting to the anticipated phasing out of
quantitative easing (QE) and other similar central
bank market support initiatives. Looking ahead,
insurers must strive to generate extra yield in
uncertain markets whilst also preparing for the
impact of anticipated interest rate rises.
The road ahead presents significant challenge
to insurers, whether these be through increased
market volatility, the growing burden of regulatory
change or the sheer complexity of tactical asset
allocation in an increasingly diverse marketplace.
But the current financial environment also presents
positive opportunities to innovate, expand and tap
promising new investment sectors.
As markets look to generate new growth,
we see a number of emerging themes that
will have a long-term impact on returns for
investors which are explored in this brochure.
How clients address the challenges and
opportunities they present will depend on
the requirements of their individual investment
portfolios and their economic capital frameworks.
The fixed-income market itself continues to see the
steady evolution of an innovative and sophisticated
universe of debt-based instruments designed to
meet the funding needs of recovering economies
and the diverse risk appetite of the investment
community. Navigating this landscape can present
significant challenges.
Whether clients have challenges focused on
income generation, asset liability management,
tactical asset allocation or building meaningful
growth potential into their investment portfolio,
BNY Mellon’s independent investment firms can
offer dedicated expertise and support, providing
global coverage across the fixed-income spectrum
as well as beyond transparent and timely reporting.
With long standing presence in the international
insurance market and through a global reach,
market expertise and innovative solutions,
BNY Mellon are well positioned to act as a single
source in enabling our insurance clients to meet
their goals.
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