Insurance Company As Fund Managers For Corporates

The nature of the Life Insurance business implies the formation of technical provisions, investment in & the holding of assets to cover these technical provisions and a solvency margin. An insurer has to meet its contractual liabilities to policyholders by managing such assets in a sound, careful and practical manner taking into account the profile of the liabilities held and, indeed, the complete risk-return profile.

The complete risk-return profile results' from an integrated view on product and underwriting policy, reinsurance policy, investment policy and solvency level policy.

How does the investment process work?

Insurers typically hold, in varying proportions, three main types of financial assets -

Bonds and other fixed income instruments
Equities and equity type investments
Debts, deposits and other rights

The actual composition of an asset portfolio at any given moment is the product of a well-structured investment process itself, which is characterized by the following steps -

Disciplined and structured investment process
Approach in investment decision making
Business cycle, relative value' investment style which offers the flexibility to add substantial value throughout the different stages of economic cycles

What are the advantages of having insurance companies as fund managers?

Master policyholder

Most insurance companies form investment committees' which consist of full time, high level investment professionals. These fund managers have real time access to crucial market information and are able to execute trades on the largest and most cost effective scale.

Diversification

Insurance companies invest in a broad range of securities. This limits investment risk by reducing the effect of a possible decline in the value of any one security. Exposure to equity investments is from the approved list of universe of stocks which form a part of the S&P CNX Nifty or BSE 100 Index.

Low cost of Fund Management

An insurance company let's you participate in a diversified portfolio by investing a small amount with minimal fund management charges.

Convenience and Flexibility

You own just one security rather than many, yet enjoy the benefits of a diversified portfolio and a wide range of services.

Liquidity

You can get your money back promptly at net asset value related prices from the fund itself.

Transparency

You get regular information on the value of your investment in addition to disclosure on the specific investments made in the product.