Understanding Insurance Companies

Insurance companies tend to have a bad reputation with bankers: boring, technical, old fashioned businesses, and with investors: confusing accounting disclosures, negative surprises in their results, volatile share price. Yet, insurance companies have improved their act since the internet bubble burst in 2001 and have invested in the development of advanced enterprise risk management systems. As a result, they have become sophisticated users of capital markets solutions such as derivatives to hedge their risks (not only catastrophe bonds to hedge catastrophic risk, or derivatives and dynamic hedging to hedge their financial risk, but also innovative derivatives to hedge their life longevity risk) and some of them seem to have weathered the credit crisis better than banks (with notable exceptions: AIG, monolines, sellers of variable annuities). Insurance companies are a very interesting sector for capital markets professionals because: a. they have opened up to more sophisticated solutions, b. some of the solutions are still being devised and therefore represent a potentially higher margin business. However, insurance companies’ clients often complain that bankers simply sell them the latest ‘hot product’ and are not sufficiently attuned to their specific business model, risks and needs. The purpose of this training is to simply demystify this sector, provide bankers with the jargon they need to understand insurance clients disclosure and understand how to link capital markets solutions to specific insurance companies needs.

A full-day class would include the analysis of a real life insurance company’s results with an assessment of performance, including embedded value definition and modeling.