Article at a glance:

A smarter investment strategy for insurers

Like many investors, insurance companies have pursued greater gains in recent years through more complex and risky ventures. Although their investment strategies have changed, their performance measures haven't—a disconnect that has exposed them to billions of dollars in losses, which have destroyed shareholder value and led ratings agencies to downgrade these companies. To revive, they need to assess risk and to pursue value in their core insurance businesses rather than higher yields.

The take-away

As with the banking industry a few years ago, insurers must now adopt transparent approaches, including more precise risk management and the separation of the investment and insurance functions, to manage their performance effectively.