1. Investment Captive Strategies
Panelists
Dave Tatlock, Director at Strategic Risk Services
Michael Scotto, Partner at Aon Investment Consulting
Frank Tedsesco, Marketing Director at Optimum Quantvest Corp.

2. Why Investments Matter
P&C Industry Investment Income vs. Underwriting Income (Pre-Tax Results)
A Balancing Act
For commercial P&C insurers, investment results have historically offset weaker underwriting profits
Source: P&C industry statutory financial results as reported by S&P Global Market Intelligence (SNL.com).
Includes investment income and realized and unrealized capital gains and losses through December 31,2018.

3. Where to Begin?

4. Governance Investment Policy Statement (IPS)
Investment Policies and Guidelines are Fundamental
Investment Policy Statement (IPS)
Defines roles and responsibilities of the various parties
Presents long-term return and risk objectives
Documents major constraints
Liquidity
Time horizon
Regulatory
Risk preference
Includes asset allocation strategy and targets
Outlines risk control and monitoring procedures
There is only one IPS – a living document that should be updated periodically

5. Governance Investment Guidelines
Investment Policies and Guidelines are Fundamental
Investment Guidelines
Investment manager and portfolio specific
Provides the objectives and constraints for fund or portfolio
Typical covers:
Permitted securities, sectors and asset classes
Issue and sector limits
Credit quality thresholds for fixed income portfolios
Benchmarks and performance objectives
There is one investment guideline per manager, so depending on the number of managers in the portfolio, there can be multiple investment guidelines

6. What it looks like in Practice
Investment Policy Statement and Guidelines
IPS
Asset Allocation and
Investment Structure
Asset Classes
Money Market
Fixed Income
Equities
Asset Manager 1 (active)
Asset Manager/ Guidelines
Asset Manager 1 (active)
Asset Manager 1 (passive)
Asset Manager 2 (passive)

7. Risk Management Primary Risks to Consider Key Questions
Asset Allocation
Main source of portfolio volatility and risk
Liquidity
Projected outflows should be understood
to avoid a “liquidity crunch”
Concentration
Sector, issuer & quality limits
Manager Risks
Outside fund manager
performance
Operations
Internal
Controls
How much cash, fixed income, equities to have in the portfolio?
Are investments liquid enough to fund worst case near term outflows?
Are investment guidelines capturing important risk constraints?
Are investment managers performing inline with benchmarks, peers, etc.?
Do third party managers have appropriate controls?

8. P&C Industry Asset Allocation (YE’18)
Fixed Income Returns
P&C Industry Asset Allocation (YE’18)
7% Cash
68% Bonds
21% Equities
4% Other Assets
Sources: Bloomberg, MSCI, Russell, S&P Global Market Intelligence (SNL.com). .

9. Asset Allocation
Equity Returns
Sources: Bloomberg, MSCI, Russell. .