Insurer Solutions: Capital

Even before the COVID-19 outbreak, insurers have faced many challenges in sourcing, allocating and managing capital to provide capital efficiency and investment returns in recent years. Changing regulatory and accounting treatment of certain product lines and assets has added additional complexity. This combined with constrained organic top-line revenue growth opportunities in many geographic and some product markets, together with a continued focus on activities to evolve and transform business models, including digitalization and InsurTech, has fueled high levels of divestment, merger and acquisition activity.

Why Willis Towers Watson

To create solutions that optimize capital strength and stability, promote resilience and provide platforms on which to drive growth, Willis Towers Watson draws on a breadth of advisory expertise combined with proprietary modeling and technology to deliver solutions for clients from capital frameworks and assessment to strategic reorganization, reinsurance structuring and placement, and asset allocation.

Capital framework, management and allocation

We take a holistic approach to identify the sources and constraints around capital, creating frameworks on which to underpin future decisions. This allows clients to identify, assess and prioritize capital management activity. Our best practice approach will take into consideration factors such as the link to risk appetite and management, fungibility constraints and capital allocation framework as well and will be formulated to ensure it aligns with business decision taking and objectives.

Capital assessment and performance management

Return on capital employed is perhaps a key measure of the effectiveness of insurance operations and often drives market sentiment and business decisions. Meeting the capital adequacy requirements of regulators, advising on technical provisions, allocating performance between business units and business lines and setting hurdles such as pricing frameworks are critical inputs to implementing a capital management framework.

Flexible, scalable and well-governed capital and financial reporting models underlie this, and enable clear and timely communication to multiple stakeholders. Willis Towers Watson has been at the forefront of capital and financial reporting for decades, both advising insurers as well as providing market-leading propriety modeling and technology.

Strategic planning and mergers & acquisitions

Insurance is a sector rich in corporate trading, consolidation and restructuring. Willis Towers Watson supports insurers in all stages and elements of mergers, acquisitions and divestments, from the development of corporate strategy, through to target identification, transaction preparation, due diligence, actuarial valuations, deal negotiation and execution. In addition, our human capital experts play an important part in helping companies plan for and work through the material risks inherent in integrating company cultures or in restructuring operations.

Reinsurance Solutions

Less pronounced rating cycles, alternative capital sources, consolidating pressures and shifting markets in classes such as cyber, life, health and casualty are just a few of the factors that affect markets today. Willis Re has been advising insurers and reinsurers for nearly 200 years. Today, over 750 companies trust us to recognize strategic insurance market issues and specific business line trends to quantify and manage risks, to optimize capital or earnings and to promote resilience to extreme loss events. We do this by being a broad-based risk advisor to our clients, with a true one-team approach and applying industry-leading advanced analytical approaches and tools. We help clients manage the full spectrum of risk, and fundamental to this, is our expertise in structuring, placement and execution.

Asset & Liability Management (ALM) and Strategic Asset Allocation (SAA)

Mindful management of investment reward and risk, and how this relates to the liability portfolio is central to insurers’ capital management strategy and profitability. Our investment specialists support insurers with specialist ALM and SAA solutions, which take account of the insurer’s risk, return and capital objectives frameworks and the nature and duration of liabilities. Our proprietary modeling and technology, together with investment assumptions are calibrated quarterly for approximately 40 asset classes and used in the management of approximately $2 trillion in insurance company assets.