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Persistent low rates push insurers toward riskier investments

Posted On: Jun. 9, 2015 12:00 AM CST

Persistent low rates push insurers toward riskier investments

SOUTHAMPTON, Bermuda — Insurers are taking on riskier investments in their quest for higher returns in what has been an ongoing low-yield environment, according to speakers at the 2015 Bermuda Captive Conference in Southampton, Bermuda, on Tuesday.

“How are insurers dealing with this persistent low-rate environment?” asked moderator David Gibbons, managing director for PricewaterhouseCoopers L.L.P. in Bermuda, during a panel discussion on finding investment opportunities.

They are taking on more investment risk, panelists answered.

“What we have seen is an increase in the level of risk they are prepared to take in the investment portfolio,” said Robert Goodman, managing director of global insurance asset management for Goldman Sachs Group Inc. in New York.

Some are willing to take on more low-rated, speculative investments.

“You're seeing people who are really dipping down; investors are going down in to the triple-C (rated), much more speculative areas of the market,” said Jerry Samet, senior vice president and senior portfolio manager for global and U.S. credit with HSBC Global Asset Management (USA) Inc. in New York.

Those managing captive insurers also appear to be embracing this strategy.

“We've seen captives much more interested in finding out what they can get back in terms of return against increased risk,” said William Dalziel, a partner with London & Capital Asset Management Ltd. in London.

“They are interested in finding out where could they take this risk and how much risk should they take,” Mr. Dalziel said.