Insurers warm to risk factor diversification

The drive towards better risk diversification is pushing insurers to rethink their investment process in terms of risk factors rather than traditional asset classes. Blake Evans-Pritchard reports on some of the approaches being taken

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Insurers are beginning to look to pension funds for examples of how better to understand investment risk and, in particular, how different risk exposures might interrelate.

The area of concern is diversification, a key issue for insurers who experienced alarming and unexpected correlations between asset classes during the 2007–08 financial crisis prompting a rethink of their approach to asset investment. Investors noticed that assets that had previously worked independently of one another moved

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