P/C Insurers’ Investment Strategy Focused on Cycle Management

May 30, 2006

Cycle management is the key driver of property/casualty insurance company investment strategies today, according to a new study by Conning Research and Consulting, Inc.

“Regardless of size or underwriting focus, P/C insurers adjusted their investment portfolios in response to cycles in the underwriting and economic conditions from 2000 to 2004,” said Clint Harris, analyst at Conning Research & Consulting. “We may now be seeing the beginnings of a more profound change in investment strategies as a result of enterprise risk management. However, hard data indicate that underwriting cycle management is still the catalyst behind most changes in allocation among principal investment classes.”

The Conning Research study, “Property Casualty Investment Survey & Analysis: Emerging Cycle of Opportunities,” analyzes investment conditions and trends in the P/C industry, including a breakdown of investment profiles by size and underwriting peer groups. Conning Research surveyed industry executives in preparing this analysis.

“In 2004 much of the industry appeared to be moving toward higher-return investments as the underwriting cycles softened, bond yields increased, and equity market values grew,” said Scott Daniels, managing director at Conning Research & Consulting. “With a forecast of generally waning hard market underwriting conditions in 2006 and softer conditions in 2007, insurers may focus more on investment returns to keep company profits from sagging.”

Source: Conning Research & Consulting, Inc.

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