Insurance companies are stuck. On one hand, they face insufficient returns on traditional low-risk investments. On the other hand, they don't have the technical tools to minimize risk in more diversified portfolios. This opportunity is complex, but open for innovation.
Insurance investment managers are under extraordinary pressure. On one hand, they can no longer get the returns they need from traditional low-risk investments such as government and Global 1000 bonds. In fact, because many funds have been under-performing in relationship to the liabilities they have to cover, pressures to achieve higher returns have become especially intense. On the other hand, those returns can’t be gained at the expense of unacceptable risk—especially with regulators keeping a close eye on how insurers factor risk into their total portfolios.