标题: [GRRR] Insurance Company IPS [打印本页] 作者: WarrenB1 时间: 2013-4-2 13:54 标题: [GRRR] Insurance Company IPS
There is no consistency in the life/nonlife IPS, its just so disjointed in terms of presentation, at least in Schweser. This is really pissing me off lol.作者: krause2 时间: 2013-4-2 13:55
What are the odds of this being the Institutional IPS, rather than say DB Pension, or Foundation, Endowment, etc..?
I looked at old exams. its:
2008: DB Pension
2007 Endowment
2006 DB Pension
2005 DB Pension
Does that mean we’re due for an insurance company question or that they just generally dont use them?作者: NakedPuts2011 时间: 2013-4-2 13:55
I think 03 had one…or was it 04?作者: cjs238 时间: 2013-4-2 13:56
Life insurance:
-need to match assets and liability interest rate risk while earning a spread between the two
-keep in mind disintermediation
Risk: overall tolerance for risk is low, most use ALM. Keep in mind credit risk and cash flow volatility risk
Return: normally stated as a net interest spread or total return of the portfolio (but this is not the preferred way given the ALM need)
Liquidity - generally low (but if they have shifted their product mix to more interest rate sensitive products, such as fixed rate annuities, this may necessitate a higher level of liquidity, because of disintermediation)
Time - long, but consider product mix
Taxes - Investment returns for claims (tax-exempt); surplus is taxable. Deferral of taxes on CSV of life insurance and annuities are a competitive advantage of life ins companies
Legal - heavily regulated. “Prudent Person Rule” NAIC
Unique
- consider products impact on investments
Non-Life
- liabilities tend to be short duration (value and timing of claims uncertain leading to volatile operating results)
- inflation can affect value of liability payments through replacement cost or current cost coverage (think homeowners insurance)
- tax planning is significant, given cyclicality of profitability: wants to max taxable income during a low periods of profitability or losses and minimize taxable income when things are strong
- long tail on liability structure
Risk
- low (unpredictable payout and inflation risk)
- understand underwriting cycle (premiums too low for risk)
- surplus can be invested more aggressively, especially to grow business
Return
- measure after tax
Liquidity
- important and substantial
- tax planning can impact liquidity
Time Horizon
- shorter than life insurance (though there is a tail on the liability)
Taxes
- sell taxable investments when profits are low and sell tax-exempt when profits are high
Legal
- risk based capital requirement
- state regulation less than life作者: Windjammer 时间: 2013-4-2 13:57
Question about the risk tolerance..
For the fixed income portfolio is it safe to say the tolerance is low? I know the surplus risk tolerance is high…
I would say low for fixed income due to the requirement they receive their principal and interest to meet policyholder liability payments, their quasi fiduciary duty, etc.
