Health insurers tend to have very short liability profiles and structure their portfolios based on cash flow modeling vs. liability matching. Companies that are profitable and have a stable to growing customer base can invest in fixed income securities with longer durations than their liabilities and may also benefit from duration tiering of these holdings that provides for the additional liquidity that companies may need to meet unexpected claims.
Some health insurers may also face the added dimension of taxes which will make municipal bonds an attractive candidate for inclusion in their portfolios.
SAA helps our health insurance clients weigh all of the important business and investment factors as part of the development of a well planned investment process.
How Do Health Insurers Determine Risk Asset Allocations?
SAA provides peer group analysis of investment risks using its Structured Peer Group approach, comparing insurers of similar size and lines of business. One of the key questions the SPG approach can answer is whether insurers consider non-investment risks – such as operating or financial leverage – when deciding on investment risk taking. Here are the initial results of SAA’s research on this.