11 August 2014Actuarial & underwriting

L&C looks to de-mystify captive market with benchmarking tools

London-based wealth manager London & Capital has launched a suite of proprietary indices for captive insurers.

The indices examine the long-term trend of three typical asset allocations across a ten-year cycle; so for the first time captive insurers have a point of reference to benchmark the performance of their investment strategies.

The guides will be published every quarter with an in-depth analysis available on an annual basis.

London & Capital says the indices will help to de-mystify financial markets, and have been optimised to suit the investment needs of three predominant profiles among captive insurers:

Index 1 is for captive insurers with a high frequency, low severity claims pattern, pursuing a conservative investment strategy. Here, we have a 90 percent allocation to investment grade bonds, with cash and equities accounting for 5 percent each;

Index 2 is for captive insurers with less immediate cash-flow requirements for claims, and which are pursuing a balanced investment strategy. Here, we have a 70 percent allocation to investment grade bonds, with equities at 15 percent, high yield bonds at 10 percent and cash at 5 percent;

Index 3 is for captive insurers that can withstand short-term market volatility, as they are looking to fund long-term liabilities. Here, we have a 50 percent allocation to investment grade bonds, 30 percent to equities, 15 percent to high yield bonds and 5 percent to cash.

William Dalziel, head of institutional clients at London & Capital says, “We know captive insurance companies are unique. They are all ‘special cases’ in terms of risk profile and each has a specific range of liabilities to meet through its chosen investment strategy. Our indices will serve as an important benchmarking tool for captives, showing them very clearly where their investment performance stands against an optimised portfolio that’s appropriate for their investment objectives.”

Dalziel continues: “London & Capital is proud to be enabling captives to ask for more from their investment portfolios – and to offer them practical guidance that will help optimise their input. All captives should be able to benefit from an investment strategy that is aligned with their unique risk profile and objectives. The indices are our contribution towards making this information more readily accessible to the industry.”