| Key Component: |
What Is This? |
Why Is This Important? |
| I. Preamble |
- An introductory statement declaring the effective date of the policy and the purpose of this document as it pertains to your company’s investment process.
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- To identify the key elements outlined within the Investment Policy along with the requirements your company’s investment portfolio will adhere to.
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| II. Investment Responsibilities |
- A detailed outline identifying all internal and external parties with an active role in your insurer’s investment process, such as CFO, CEO, CIO, Consultant, etc.
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- To clearly define each party’s specific role and duties within the investment process and ensure each party adheres to the duties assigned to them.
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| III. Investment Return and Management Objectives |
- An outline of your company’s goals and how investment performance will tie into the overall business.
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- To make certain all parties, such as the CEO, investment manager and investment consultant, understand what the company’s investment portfolio should be achieving.
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| IV. Asset Allocation & Risk Management Guidelines |
- A tabular outline of all portfolio limitations, target allocations, desired allocation ranges, maximum allocations, and any other specific measures.
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- This clear outline will ensure that the investment portfolio adheres to its required structure, as determined by the Board, Committee, etc.
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| V. Prohibited Investments & Activities |
- An overview of specific prohibited investments or investment activities.
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- Specifying prohibited investments safeguards the investment portfolio from any unwanted deviations; ensuring the portfolio complies with what is outlined in the investment policy.
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| VI. Investment Performance
& Reporting |
- A list of all standard and customized benchmarks that have been approved for measuring portfolio performance.
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- Notifies all parties of how performance of the investment portfolio will be evaluated, as well as how often investments will be measured against the benchmarks.
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| VII. Strategic Asset Allocation & Portfolio Benchmarking |
- An outline of how the investment portfolio is expected to perform against the benchmark.
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- For all parties to understand the expectations of the portfolios performance and how returns will support the company’s overall business.
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| VIII. Investment Policy & Guidelines Evaluation |
- A schedule of how often the investment policy will be reviewed.
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- A consistent review schedule is needed to account for any material changes in regulation, rating agency criteria, or business conditions.
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