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Research Studies–Proposal Requests

Insurance Company Investment Strategies in an Economic Downturn

1. Background and Purpose

As with other industries, insurance companies are not immune from the financial impact of challenging economic events. Investment performance that insurance companies relied on to support products, operations and other vital functions may rapidly affect overall company viability. Yet, what investment action should an insurance company take in light of an economy experiencing downturns that may be unprecedented and with no clear end in sight?

With this dilemma in mind, the Society of Actuaries' Committee on Finance Research is interested in exploring investment strategies for insurance companies in the time of a contracting economy.

2. Research Objective

The Society of Actuaries' Committee on Finance Research is seeking researchers to assess investment strategies that insurance companies can adopt to deal with a contracting economy. The organizers of this request for proposals envision a report that will address the following questions:

1. What are the basic types of insurance company investment strategies that are sustainable in an economic downturn?
2. How can an insurance company determine optimal investment strategies and how to assess the most effective strategy for its own situation?
3. How does the absence of a clear endpoint in a downturn affect the investment strategies?
4. What considerations should go into the timing of any broad investment strategy changes?
5. What lessons can be learned about insurance company investment strategies from countries that have experienced rapid economic deterioration?
6. What is the interaction between investment strategies and the overall historical market cycle?
7. What economic triggers could lead companies to employ a dynamic trading strategy?
8. What are the impacts of an economic downturn on an insurance company's ability to hedge risks effectively and strategies for doing so?
9. What hedging specifics should be regarded as critical in an economic downturn?
10. What tools can help manage a dynamic trading strategy or hedging strategy?

 

Through a comprehensive and thorough review of these questions, the report would benefit both insurers and those interested in a grounding of the issues related to investment during an economic downturn.

3. Proposal

To facilitate the evaluation of proposals, the following information should be submitted:

1. Resumes of the authors, including any graduate student(s) expected to participate, indicating how their background, education, and experience bear on their qualifications to undertake the research. If more than one author is involved for each report, a single individual should be designated as the lead researcher and primary contact. The person submitting the proposal must be authorized to speak on behalf of all the authors as well as for the firm or institution on whose behalf the proposal is submitted.
2. An outline of the approach to be used. Details should be given regarding the manner in which appropriate published material will be identified and evaluated, search techniques to be used, collateral material to be consulted, and possible limitations of the review and analysis.
3. Cost estimates for the research, including computer time, salaries, report preparation, research costs, etc. Such estimates can be in the form of hourly rates, but in such cases, time estimates should also be included. Any guarantees as to total cost should be given and will be considered in the evaluation of the proposal. While cost will be a factor in the evaluation of the proposal, it will not necessarily be the decisive factor.
4. A schedule for completion of the research, identifying key dates or time frames for research completion and report submission.
5. Other related factors that give evidence of a proposer's capabilities to perform in a superior fashion should be detailed.

 

4. Selection Process

The SOA's Committee on Finance Research is responsible for the selection of the proposal to be funded. Input from other knowledgeable individuals may also be sought, but the SOA's Committee on Finance Research will make the final decision. The SOA's Research Actuary will provide staff actuarial support. A Project Oversight Group (POG) will be appointed to oversee the project upon selection of the proposal.

5. Questions

Any questions regarding this RFP should be directed to:

• Steven Siegel, SOA Research Actuary at ssiegel@soa.org
• ph: 847.706.3578
• f: 847.273.8578
6. Notification of Intention to Submit Proposal

If you intend to submit a proposal, please e–mail written notification by November 15, 2009 to:

• Barbara Scott, SOA Research Administrator
• Society of Actuaries
• 475 N. Martingale Road, Suite 600
• Schaumburg, IL 60173–2226
• ph: 847.706.3592
• f: 847.273.3592
7. Submission of Proposal

Please e–mail a copy of the proposal to Barbara Scott at bscott@soa.org.

Proposals must be received no later than December 1, 2009. It is anticipated that all authors who have submitted proposals will be informed of the status of their proposal in January 2010.

Note: Proposals are considered confidential and proprietary.

 

8. Conditions

The SOA reserves the right to not award a contract for this research. Reasons for not awarding a contract could include, but are not limited to, a lack of acceptable proposals or a finding that insufficient funds are available. The SOA also reserves the right to redirect the project as is deemed advisable.

The SOA intends to copyright and publish the results of this research. The research will be considered work–for–hire and all rights thereto belong to the SOA. However, appropriate credit will be given to the researcher(s).