Property insurers pushing on investment risk limits -survey

Mon Sep 17, 2012 10:25am EDT

* 53 pct of CFOs say companies near risk limits

* Almost one in three expects to get more aggressive

Sept 17 (Reuters) - Half of the chief financial officers at property insurance companies say they are near their limit for investment risk, yet roughly a third expect to become more aggressive in the next year, according to a study released on Monday that underlines the challenges that low interest rates pose to insurers.

The Towers Watson survey of 32 CFOs from North American property and casualty companies broadly mirrors a similar survey the consultancy conducted of life insurers this summer, where 40 percent said they had already breached the risk limits they had set.

Interest rates have become a preoccupation for the insurance industry, which relies on steady long-term returns to fund its obligations. With rates stuck at historic lows and little prospect of change in the next few years, insurers are pushing their limits to find sufficient returns.

Towers Watson said 53 percent of the CFOs surveyed said their companies were "at, or near, their risk tolerance limit." Separately, 31 percent of those surveyed said they expected to become slightly more aggressive about investments in the next year.

"The responses from our survey illustrate that capital appreciation and investment income aren't sufficiently contributing to P&C insurance company returns levels needed to adequately please their investors," Towers Watson senior consultant Stuart Hayes said in a statement.

Among the options many insurers are considering to boost returns are high-yield bonds, investment-grade U.S. corporate debt, real estate and emerging-market debt. Those were some of the top choices of insurer chief investment officers in a Goldman Sachs Asset Management survey released in July.

A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

Find your dream retirement town

Florida? Hawaii? Reuters has teamed up with Zillow to give you the power to customize a list of your best places to retire.  Video | Full Article