Property-Casualty Investments: The Low Interest Rate Environment Continues: Wait It Out or Take on Risk?
Conning—Property-Casualty Insurers Facing the Challenge of Continued Low Interest Rate Environment
(Hartford, CT) November 20, 2014—The property-casualty industry has been challenged by falling interest rates, but most companies have the balance sheet strength required to meet and respond to the challenge, according to a new study by Conning.
“The declining interest rate environment is a decades-long condition, but one that has accelerated in the past several years, stressing property-casualty insurers’ profitability,” said Stephan Christiansen, Managing Director at Conning. “Fortunately, the industry is also benefiting from a strong capital base by historical standards, along with continued strong loss reserves. These strong balance sheet characteristics have supported the capacity for companies to take on additional investment risk. Some companies are clearly taking advantage of these opportunities, supported by new approaches to measure risk and return opportunities.”
The Conning study, “Property-Casualty Investments: The Low Interest Rate Continues—Wait it Out or Take on Risk?” explores how the industry has responded to the interest rate challenge, and looks prospectively to how this response may continue and change as companies look for broader opportunities. The study reviews differences by subsectors of the industry.
“In the next couple of years, it is likely that the property-casualty industry will face continued declines in book investment yields and softening pricing,” said Steve Webersen, director of research at Conning. “As reinvestment rates continue to depress book yields, companies may be further pursuing the limits of duration, credit, and liquidity. As they review their options, insurers will need to employ expanded tools to carefully model the economic impact that such decisions may have on capital and performance, depending on interest rates, economic performance, and their unique risk and return objectives.”
“Property-Casualty Investments: The Low Interest Rate Continues—Wait it Out or Take on Risk?” is available for purchase from Conning by calling (888) 707-1177 or by visiting the company’s web site at www.conningresearch.com.
Conning (www.conning.com) is a leading investment management company for the global insurance industry, with almost $92 billion in assets under management as of September 30, 2014 through Conning, Inc., Conning Asset Management Limited, Cathay Conning Asset Management Limited, and Goodwin Capital Advisers, Inc. Conning’s unique combination of asset management, risk and capital management solutions and insurance research helps clients achieve their financial goals through customized business and investment strategies. Founded in 1912, Conning is focused on the future, providing clients with innovative solutions, leveraging its global capabilities, investment experience, and proprietary research. Conning is headquartered in Hartford, Connecticut, with additional offices in New York, London, Cologne, and Hong Kong.