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Captive Insurance Boards Can Benefit from NAIC Capital Markets Special Reports

Board Meeting FN
February 24, 2016

Since investment portfolios comprise one of the largest assets on the balance sheet of any captive, it is an area that deserves special attention at any captive board meeting.  However, most captive boards probably have limited resident investment expertise and therefore look for external resources to assist in their fiduciary oversight.

One potential source of information is the National Association of Insurance Commissioners (NAIC) Center for Insurance Policy and Research, a small, positive by-product of the fees paid to the Security Valuations Office (SVO). The Center produces white papers on a variety of investment topics, some of which are very germane to captives.

Within the last few months, the Center has produced two such papers. The first, dated December 1, 2015, is titled "The Evolution of Investment Portfolio Asset Allocations in Small U.S. Insurers." Many captive owners look for ways of benchmarking their portfolio asset allocations against industry standards. This report provides valuable information concerning small insurers, most closely related to captive insurance companies.

The second report, dated January 26, 2016, is titled "Analysis of the U.S. Insurance Industry's Exposure to Below-Investment Grade Investments." Given the ongoing search for yield within investment portfolios, the paper provides historical context concerning the use of noninvestment-grade debt within insurance company investment portfolios.

There are numerous other papers available on the NAIC website that may have applicability to captives. We encourage our readers to take advantage of this free information.

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