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CCRIF – A Captive for all Seasons Cayman Captive Forum 2013

CCRIF – A Captive for all Seasons Cayman Captive Forum 2013. William Dalziel, Partner London & Capital Asset Management Ltd. Background.

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CCRIF – A Captive for all Seasons Cayman Captive Forum 2013

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  1. CCRIF – A Captive for all SeasonsCayman Captive Forum 2013 William Dalziel, Partner London & Capital Asset Management Ltd

  2. Background • London & Capital were appointed in 2007. We are currently responsible for the management of the largest part of the Insurer’s funds, in a wholly Fixed Income mandate. • CCRIF’s Investment Policy Statement is reviewed no less than annually to ensure it continues to meet the Insurer’s evolving requirements. • The IPS includes a range of risk control criteria, including minimum ratings, concentration and geographical limits, and strategic asset allocation with bounded limits for each sub asset class. • In addition, it also recognises the need to avoid adding to enterprise risk (exposure to Insurers/Reinsurers, issuers in the same geographical zone as its Policyholders), the need to maintain liquidity in line with the Insurer’s claims paying commitment, and limiting portfolio volatility.

  3. London & Capital’s Delegated Responsibilities • Examine, understand and assist the Board to articulate its investment objectives and risk appetite • Understand CCRIF’s investment constraints whether imposed by risk appetite, regulation, liability profile, policyholders or owners • Specifically, be aware of CIMA’s Supervisory framework • Insurance Law 2010 and implementing Regulations (Dec 12) • Risk Management Rule (Dec 2010) • Translate all of the above into a best estimate prospective return and volatility expectation based on the Macro Economic environment • Minimise portfolio exposure to unrewarded and operational risks • Provide the Board with information and analysis of sufficient granularity to enable them to assess and control the portfolio risk and our own effectiveness • Work closely with other service providers to facilitate a high standard of service, and • Decide how to invest the assets, trade and manage the portfolio.

  4. Accountability

  5. Active management and the Business Cycle • Source: London & Capital • Different investments perform differently at different points in the business cycle • Portfolio management needs to adjust accordingly – tactical asset allocation and duration changes

  6. How CCRIF’s Objectives impact the Portfolio

  7. How CCRIF’s Objectives impact the Portfolio

  8. How CCRIF’s Objectives impact the Portfolio

  9. One way to think about Risk Categories Operational Liquidity Financial Risk Areas Market Aggregation / Diversification Credit Underwriting Frictional

  10. How we control Portfolio Risk

  11. Risk & Portfolio Reporting • L&C reports Risk to the Board by reference to a range of factors that each contribute to a balanced understanding of the whole: • Portfolio Compliance with IPS • Macro Economic Analysis – How the (prospective) outlook for assets is being affected by market, business and ratings cycles, thematic and other forces • Scenario Analysis – Sources of return, impact of a one Standard Deviation move in each factor • Portfolio Correlation • Value at Risk (VaR) • Ratings • Portfolio Concentration • Sharpe Ratio • Performance is reported across two dimensions: • The change in the value of the portfolio over a given time as a result of • Income generated, plus/minus • Change in market value, and • The risk accepted in achieving this

  12. Example Scenario Analysis • Source: Bloomberg

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