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Enhanced indexing solutions for insurers

Enhanced indexing solutions for insurers

26-03-2020 | Insight
Over the past decade, investors have operated a massive shift from actively managed strategies into passive ones. For insurance companies, the move towards passive has often been encouraged through their strategic asset allocation processes typically using common equity indices as a benchmark.
  • Edward Collinge
    Edward
    Collinge
    Global Head of Insurance Strategy
  • Jan de Koning
    Jan
    de Koning
    Portfolio Manager Core Quant Equities

Speed read

  • Passive products based on public indices present serious drawbacks
  • Many insurers move to ‘middle-ground’ between passive and active
  • We explain the benefits of targeting time-tested factor premiums
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Going passive for their equity allocation has therefore been a natural step, as they sought more cost-effective solutions for their investments. But while passive products based on public indices have their merits, they also present serious drawbacks. This is encouraging a growing number of insurers to move to ‘middle-ground’ between passive and traditional active products, in particular Enhanced Indexing solutions that target time-test factor premiums with a low and controlled tracking error.

In this paper, we explain the benefits of targeting time-tested factor premiums for insurers. We also discuss why enhanced indexing is increasingly becoming a cornerstone of many insurers’ developed and emerging market portfolios.

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