Insurance Asset Risk's 2021 EMEA conference highlighted the challenges insurers face in finding yield, diversify risk in their portfolios and play a role in the transition to low carbon economies.
Day two of the conference started with a panel on alternative fixed income, where panellists said low yields in core fixed income was not the only driver for their increased allocation to alternatives. In particular, risk diversification and opportunities provided by retreating from spaces such as lending were singled out as key drivers.
A panel on regulation emphasised key divergence in opinions between policy makers, regulators and industry when it comes to the Solvency II review. Although the general direction of travel in the European Commission's proposal was welcomed by European Insurance and Occupational Pensions Authority (EIOPA), and the industry, represented by Insurance Europe, "the devil is in the details" the audience was told.
EIOPA's head of policy department Justin Wray said the regulator was "disappointed" with some of the divergence between EIOPA's advice and the Commission's proposals.
However, Wray welcomed EIOPA's mandate to investigate 'green capital charges' and to report back to the Commission by 2023. He said the work would be conducted without "preconception".
But what constitutes a 'green' asset is not yet universally accepted, and this became apparent during a panel on infrastructure investing. The question of nuclear financing crept in the debate, and although politicians may have their ideas on the topic, the jury is still out for investors.
With regards to sustainability, the conference would have been incomplete without a panel on net-zero – the hot topic in the lead up to COP26. Insurance Asset Risk asked panellists why there is a need for net-zero investing beyond investing using environmental, social and governance (ESG) criteria and if net-zero in itself wasn't part of ESG. Insurers said net-zero went beyond ESG, and admitted that the concept was the latest in the "race of sustainability KPIs".
A panel dedicated to the 'S' in ESG underlined the lack of metrics and measurements when investing for social impact. However, the panel reminded the audience that metrics are only one aspect of socially-minded investing, and the lack of it is not a reason for inaction.
A round up of day one of the Insurance Asset Risk EMEA conference is available here.
For more information about the event and to watch the panels on demand, click here.