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Komfie Manalo, Opalesque Asia:
A special report by insurance ratings firm A.M. Best starts out with the known premise that
insurers have limited choices for investing new dollars from maturing
securities and new business premiums to maintain targeted risk-adjusted
returns without a meaningful increase in interest rates.
The report titled, "A.M.
Best Hedge Fund Performance Has Insurers Reducing Exposure," pointed
out that with interest rates remaining persistently low, NAIC Schedule
BA assets, which include alternative investment securities, have
generally provided insurers with the potential for higher risk-adjusted
returns to help mitigate the decline in higher portfolio book yields.
This industry trend toward modestly higher allocations to
non-traditional asset classes is likely to continue.
Despite some public pullbacks by large life insurers, total insurance
industry investments in hedge funds have continued to increase over the
last two years. Hedge fund holdings within the life/annuity (L/A)
segment have grown from $11.4bn in 2013 to $14.2bn in 2015, while the
property/casualty (P/C) segment has increased its holdings from $8.9bn
to $10.2bn. In light of these trends, L/A asset allocations to hedge
funds have increased from 7.6% to 8.5% between 2013 and 2015—the ...................... To view our full article Click here
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