Henrik Matsen: First, it's important to recognise that not all insurers are the same. Take Property and Casualty (P&C) insurers, for example – they operate business models where investment returns are not the basis of organisational profitability, rather most profit is driven through business line activities. If you look at something like car insurance, for years, as interest rates remained low, these companies mostly stuck to very conservative, liquid investments, primarily in listed fixed income.
But now, with interest rates rising, even P&C insurers are starting to think more seriously about how to improve performance on the investment side. If you can add 50 to 100 basis points of additional returns to the investment portfolio, that can translate to one or two extra points of return on equity for the insurer. That’s significant, especially now that finance teams are reassessing how investment activities can contribute directly to profits.
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