Insurers face the challenge of contemplating their existing business models and having to remain competitive and viable. Most insurance policies create predictable and often long-term liabilities, so intrinsically one could expect insurers to be ideal sources of long-term funding and a source of liquidity.
However, the challenge of satisfying the diverse interests of a wide variety of stakeholders, both internal and external, has resulted in multiple approaches to capital management often siloed to meet economic, accounting and regulatory aspects. In addition, regulation, risk appetite and other constraints have impacted insurers’ ability to provide long-term funding and resulted in funds being invested primarily in fixed interest and short-term instruments.
Questions remain on the sustainability of such a model.
