Insurer Investment Forum XXIII

Insurer Investment Forum March 29 - 30, 2023
Marana, AZ
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SWOT Analysis: Asset Allocation
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A SWOT Analysis will identify internal strengths, weaknesses, external opportunities and threats to each component of your insurer or risk pool’s investment process.

The SWOT analysis acts as a road map for future changes to the investment process.

Conducting a SWOT Analysis for each segment of the Investment Process Value Chain can be the best way to develop a blueprint and prioritization of how and where to improve the investment process.

Below are common practices and areas of concern within an insurer or risk pool’s asset allocation:

Example: SWOT Analysis - Asset Allocation

Strengths: Weaknesses:
  • Set targets and ranges for major asset classes (i.e. core fixed income, equities, etc.).
  • Risk Asset Allocation includes appropriate asset classes, with diverse options and opportunities.
  • Majority of invested assets in fixed income; supports liabilities and minimizes surplus volatility.
  • Equity allocation is comprised mostly of passive vehicles in highly efficient and liquid markets.
  • Lack of rationale for allocation framework.
  • Allocation to certain asset classes high relative to peers.
  • Overall portfolio duration is too long or short.
  • Guidance on ranges or targets are either too narrow or too wide.
  • Lack of diversity in invested asset classes/sectors.
Opportunities: Threats:
  • A formal asset allocation review should be conducted.
  • Asset mix should consider company financial condition and forecasts.
  • Current asset allocation can be completed in a much more cost-effective manner, while reducing fees.
  • Discussion of risk appetite relative to existing and potential asset allocations.
  • Portfolio book yields continue to be underpressure from low interest rates.
  • Volatility within risk asset markets has increased materially.
  • Further regulatory or business changes that may impact the stability of cash flows.
  • Comments from ratings agencies on theinvestment portfolio may be problematical.

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