Press Release - AUGUST 29, 2018

A.M. BestTV: Volatility, Fees Cool Insurers' Ardor for Hedge Funds, Says A.M. Best Associate Director

 Lee McDonald
Group Vice President, Publication and News Services
+1 908 439 2200, ext. 5561


In this A.M.BestTV episode, Jason Hopper, associate director, industry research and analytics, A.M. Best, said insurers have become more selective in their use of hedge funds. Click on to view the entire program.

For a second straight year, the insurance industry has pulled back on its hedge fund investments. Hopper believes hedge fund performance is a dominant factor.

“Volatility is not an insurer’s best friend. Especially when the two preferred strategies of hedge funds—equity long/short and multi-strategy— ave been a little volatile this year,” said Hopper. “Fee structures, I think, is the other factor, potentially pushing some insurers out of the hedge fund space or at the least reducing their over-allocations to hedge funds.”

Hopper also highlighted how A.M. Best is looking at changes in hedge fund investment strategies.

“Property/casualty and life/annuity insurers’ have about 9% of their hedge fund holdings allocated to distressed security hedge funds. Those types of funds typically back non-investment grade organizations or companies that are in bankruptcy or close to default. If the credit markets make a wider turn toward the negative that would definitely be something A.M. Best would more closely monitor and analyze,” he said.

Recent episodes of A.M.BestTV include:

  • Qard Hasan Loan System Creates Conflicts for Takaful Insurers, Says A.M. Best Associate Director: Salman Siddiqui, associate director, analytics, A.M. Best, said takaful-oriented insurers often rely on an interest-free loan system, known as Qard Hasan, to cover policyholder deficits, and that over-reliance on the system can create longer-term issues: .

  • Insurers Are Pursuing a Range of Post-Brexit Plans, Says A.M. Best Senior Director: Catherine Thomas, senior director of analytics, A.M. Best, said insurers are creating subsidiaries, building new relationships and transferring liabilities in an effort to prepare for possible outcomes depending on how Brexit proceeds: .

  • California Wildfires Will Impact Homeowners Insurers, Say A.M. Best Analysts: Sridhar Manyem, director, and Jason Hopper, associate director, both in A.M. Best’s industry research and analytics department, said losses from this year’s numerous wildfires in California will likely impact pricing and underwriting for the state’s homeowners market: .

  • Captives Tap Reinsurers for Capital, Business and Data Support, Says Panel: At the Vermont Captive Insurance Association conference, a panel of captive insurance and reinsurance experts said captives, which are typically smaller insurance organizations, look to reinsurers as much for capital as for business expertise: .

A.M.BestTV covers exclusive A.M. Best and insurance industry information and reports, targeted topics and key developments in the insurance, reinsurance and related sectors daily. Sign up for alerts of episodes at View A.M.BestTV episodes at .

A.M. Best is a global rating agency and information provider with a unique focus on the insurance industry.