Recent report urges insurers to consider non-traditional assets when making investments.
In a report IFoA said life insurers had used "vanilla" investment strategies but in a low-yield environment they need to "broaden their horizons".
The recommendations were published in a report produced by the IFoA's Non-Traditional Investments Working Party on 19 January. The report Non-traditional investments – key considerations for insurers addresses different assets insurers can consider. These include: infrastructure, real estate-backed loans, asset-backed securities and unsecured assets such as high-yield bonds.
"Life insurers have historically relied upon investment markets as a key source of profit and crucially have been able to do this while embarking on relatively 'vanilla' investment strategies. In the current low yield environment, broadening their investment horizons is critical to maintaining profitability," said the report.
Gareth Mee, chair of the working party and director at EY, said: "We are very proud to publish this paper, which we believe is the most comprehensive paper to date on non-traditional assets. The lack of data in this area is well known, and so we hope this paper will be a welcome resource for the industry.
"The working party has pulled together its collective proprietary knowledge of the assets as well as their appropriateness for insurers, and we hope that it will help insurers to continue to explore the opportunities available and to navigate some of the challenges presented in investing in non-traditional assets."
Last month, Mee and Gareth Jones, member of the working party and a senior actuarial manager at MGM Advantage, also addressed the risks and gains of non-traditional assets.
