Integrating risk management with the investment process - a Munich Re case study

The perennial challenge for insurers and reinsurers is to make certain that the assets they hold will cover all their present and future liabilities. Traditionally, companies have sought to manage the risk of a shortfall through careful design and pricing of products, while investing accumulated premiums with the aim of maximising their value. However, this approach can lead to a disconnection between the liabilities and the assets meant to cover them, which can become more pronounced and problematic during periods of market stress. Christian Dahmen, Markus Hummel and Curt Burmeister discuss how risk was integrated into the investment process at Munich Re

Strengthening the connection between risk management and the investment process is a key step insurers need to take to be able to close the gap between assets and liabilities. The vast majority of Munich Re's assets (€210 billion market value as of September 30, 2013) are managed by the Munich Ergo Asset Management (MEAG) arm of the business.

Integrating risk management with the investment process in such a broad-based insurance enterprise, which comprises 70 legal entities of varying sizes