PINS S2.3 Risk management policy — investment risk

(1) An insurer's risk management policy for investment risk should include:
(a) the insurer's investment objective;
(b) formulation of an investment strategy, including allowable asset classes, strategic asset allocation, asset allocation ranges, benchmarks, risk limits and target currency exposures and ranges;
(c) a process for how individual asset classes will be managed, including which of those tasks will be done internally and which will be outsourced to investment managers;
(d) the responsibilities of individuals and committees within the insurer (such as the investment committee and the asset-liability committee) for deciding and implementing the investment strategy, and for monitoring and controlling investment risk, including reporting lines, decision-making powers and delegations;
(e) a process for the selection of qualified and competent investment managers;
(f) limits and other restrictions on the actions of investment managers, whether internal or outsourced, and the means by which compliance with those limits are monitored;
(g) modelling and stress-testing of the effect of the current and alternative investment strategies on financial outcomes and asset-liability management;
(h) processes for:
(i) ensuring the continuing appropriateness of the investment strategy, including the timing and nature of strategy reviews;
(ii) ensuring the continuing appropriateness of the investment implementation process, including the timing and nature of reviews of investment managers and the manager configuration;
(iii) monitoring compliance with the investment strategy; and
(iv) making contingency plans to mitigate the effects of deteriorating investment conditions;
(i) the segregation of duties; and
(j) performance monitoring and its role in the oversight and control of the investment process.
(2) For paragraph (1) (b), the investment strategy should be formulated taking account of the investment objective, the insurer's capital position, the term and currency profile of its expected liabilities, liquidity requirements and the expected returns, volatilities and correlations of asset classes.
Inserted by QFCRA RM/2013-1 (as from 1st January 2015).