Chief investment officers have become a "jack of all trades" at insurance companies where they are required to juggle both the asset managment and the actuary parts of the business, according to Shiuan Ting "ST" van Vuuren, chief investment officer at Sun Life International HuBS.
“You have to figure what matters at a certain point in time, because different things matter over time, and that is hard to balance in a challenging environment,” van Vuuren told the audience at AsianInvestor’s Insurance Investment Briefing Hong Kong on March 10.
For insurers the past few years have been among the most challenging in recent memory, as they grapple with rapidly rising interest rates, geopolitical risks and above all inflation.
Moreover, insurers must now also contend with the still ambiguous IFRS (International Financial Reporting Standard) 17 framework.
“There is still a lot of challenges around the [IFRS 17] modelling, calculations, and within ALM (asset liability management) there are sensitivities. I am still uncomfortable making real investment decisions based on something that is still quite wobbly,” van Vuuren said.
GONE ARE THE DAYS
Robert Turnbull, managing director and head of asset management Asia at Swiss Re, agrees that the role of an insurance CIO is becoming ever more complicated.
“The days are far behind us where a CIO could sit in a different building and have very little engagement with the group capital function and CFO. The CIO role is getting much more technical, balancing multiple metrics with many constraints, and that is only increasing under IFRS 17,” Turnbull said.
As the role becomes more technical, there is also a need to be more flexible. The two key dynamics to consider are supporting policy holders as well as the business, Turnbull said.
“As CIOs, we do need to be flexible in how we support all types of products, both from a general account perspective and a participating perspective, whether or not we are investing the money on behalf of our shareholders or earn fees from AMC (asset management company) activity. Having that flexibility as a CIO will be quite important,” he said.
SHADES OF GREEN
Elton Shum, head of Asia regional fixed income portfolio management and trading at Manulife, added that ESG factors were now among the skillsets that insurance CIOs need to add to their proficiencies.
All insurance companies, he said, are making commitments to being carbon neutral by a given year.
While CIOs and investment professionals are the ones to implement ESG targets and frameworks in investment decisions and portfolios (including green investments and carbon neutrality), this adds further considerations to their asset allocation strategies, Shum pointed out.
“We need to figure out the roadmap and how exactly we can measure the emission targets. And I don’t think that there are the proper measurement tools yet across the entire industry,” Shum said.
“We all want to be greener, but there are so many different shades of green, and we first need to learn how green we are already and how we aim to be. That is not always easy to interpret.”