Balancing Reward With Every Type Of Risk In Alternatives

Increased consideration for investment in alternative asset classes, in insurers' strategic asset allocation ("SAA") exercises, should be supported by the Prudent Person Principle ("PPP").

Insurers confronted by financial and economic turbulence over the past three years have responded by exploring new asset classes and investment strategies. But while strategic asset allocation ("SAA") exercises have helped them address emerging risks and opportunity, it is vital that the Prudent Person Principle ("PPP") is a key consideration during such work.

SAA provides a means to optimise risk-adjusted returns through exposures to a range of asset classes combined appropriately for the insurer's liabilities and investment goals. However, every SAA exercise should include a determined focus on compliance with PPP.