EDHEC-Risk Institute, Russell Investments to Design Solvency II ‘Benchmarks’

EDHEC-Risk Institute has announced that it will conduct research in cooperation with Russell Investments in order to “design new benchmarks for European insurance companies that are representative of a dynamic allocation strategy between bonds and equities.

“The aim of the initiative is to enable all small or medium-sized European insurance companies which do not have a full internal risk mitigation model to be able to avail of an objective academic reference in order to manage the risk of their equity investments.”

EDHEC described the benchmarks as being “based on dynamic core-satellite and life-cycle investing techniques, will allow investors to respect a maximum drawdown or maximum loss limit for specific horizons.”

EDHEC-Risk Institute Director, Professor Noël Amenc, explained: “The Solvency II directive is severe for investment in equities. Our goal in this project supported by Russell Investments is to design a new form of asset allocation that will enable the risk of maximum loss of equity investments to be managed while avoiding an excessively pro-cyclical approach such as that advocated by portfolio insurance techniques. By integrating concepts proposed by research on the life cycle of assets, this allocation can serve as a reference for a partial internal model.”

Pascal Duval, executive managing director EMEA of Russell Investments pointed out that the company has a “history of strong relationships with academic institutions and we’re excited to partner with EDHEC-Risk Institute, the leading risk and asset management research centre in Europe on this important initiative. Russell intends to play a leading role in providing solutions for the insurance industry in the face of the challenges represented by the Solvency II directive. We can think of no better way of doing this than by engaging in a mutually productive dialogue with EDHEC-Risk Institute.

Peter Gunning, Global Chief Investment Officer of Russell Investments, added: “Our aim is to assist our clients in better mitigating and managing risk as part of the investment process. We believe that this relationship with EDHEC-Risk Institute will allow us to offer a cutting-edge risk budgeting techniques for our clients in the insurance industry in Europe.”

Source: EDHEC-Risk Institute

Topics Europe