customers and shareholders roughly 50 million euros in interest and dividends from its own investments related to the insurance business.
Paul Achleitner: "The securitization of insurance risks will massively increase"
Securitization of insurance risks makes sense
At the workshop, Allianz SE board member Paul Achleitner spoke of the evolution of insurance as a business from risk taking to risk management. In particular he highlighted the potential benefits securitization can offer an insurer in repackaging risk and dispersing the risk via investors in the capital markets. According to Achleitner, as an effective capital management tool, the securitization of insurance risks makes increasing sense. "This has been a latent trend so far but I predict it will massively increase, and we plan to be a pioneer in this area," he said.
Achleitner estimated the market for securitizing insurance risk is likely to be 300 billion euros in ten years time, or ten times its current size. "In 1980, the ratio of financial securities to world GDP was one to one, meaning that capital markets financed the real world. Nowadays, the securitization of risks has increased this ratio to three to one", Achleitner explained to evidence the growth of risk transfer. "The fact that so many risks can now be traded offers great opportunity for an improved risk structure for organizations like Allianz," he said.
Achleitner estimated the market for securitizing insurance risk is likely to be 300 billion euros in ten years time, or ten times its current size. "In 1980, the ratio of financial securities to world GDP was one to one, meaning that capital markets financed the real world. Nowadays, the securitization of risks has increased this ratio to three to one", Achleitner explained to evidence the growth of risk transfer. "The fact that so many risks can now be traded offers great opportunity for an improved risk structure for organizations like Allianz," he said.
Helping clients pass on risks via the capital markets
Stefan Jentzsch, CEO of Dresdner Kleinwort, then talked about the role of investment banks as risk takers and risk managers. He identified three important trends which have changed the landscape for investment banks in recent years: the rise of hedge funds as players in the capital markets; the growth of electronic trading heralding a fundamental change in how trading business is done; and the growth of new techniques and structures in structured finance (such as derivatives) which have revolutionized the way risks can be hedged by clients. Dresdner Kleinwort's clients include financial institutions (such as insurers and asset managers) as well as corporates and investors.
"We help our clients pass on risks via the capital markets," Stefan Jentzsch commented, "often to hedge funds who can be willing to take on the risks traditional investors are reluctant to take. Our structuring expertise and our distribution power to the capital markets is a key component of our business," he added. Jentzsch also noted Dresdner Kleinwort's prudent approach to credit risk at the moment, in light of recent pricing and market developments in this sphere.
"We help our clients pass on risks via the capital markets," Stefan Jentzsch commented, "often to hedge funds who can be willing to take on the risks traditional investors are reluctant to take. Our structuring expertise and our distribution power to the capital markets is a key component of our business," he added. Jentzsch also noted Dresdner Kleinwort's prudent approach to credit risk at the moment, in light of recent pricing and market developments in this sphere.
Elisabeth Corley: "Customers look for demonstrable capital markets expertise and track record"
Experience, innovation and performance criteria count most
Elizabeth Corley, CEO of Allianz Global Investors Europe, looked at the huge growth in savings expected in Europe with a shift towards old age provisions such as pension funds, long term savings and life insurance. At the same time, assets are increasingly being invested on a cross-border basis and distribution channels are opening up. According to Corley, as the asset management market is changing, the business customer chooses providers less for brand and nationality reasons but more for experience, innovation and performance criteria – i.e. a firm's demonstrable capital markets expertise and track record. Proximity to the client does remain a strategic advantage.
"Benchmark oriented investments are becoming less relevant than quality and absolute return managed propositions," she explained. "Therefore diversification and such techniques as shorting and derivatives expertise are becoming more mainstream and essential to our business of delivering value-added returns." AGI is critically able to draw on its capital markets knowledge on a global basis for the benefit of customers.
Furthermore, its subsidiary Allianz Alternative Asset Management invests in funds of hedge funds, thereby offering clients more sophisticated products.
"Benchmark oriented investments are becoming less relevant than quality and absolute return managed propositions," she explained. "Therefore diversification and such techniques as shorting and derivatives expertise are becoming more mainstream and essential to our business of delivering value-added returns." AGI is critically able to draw on its capital markets knowledge on a global basis for the benefit of customers.
Furthermore, its subsidiary Allianz Alternative Asset Management invests in funds of hedge funds, thereby offering clients more sophisticated products.
Understanding capital markets is central to risk and return
Finally, managing director of AAA Holding Thomas Puetter spoke of Allianz's alternative asset strategy as part of Allianz's overall approach to a diversified investment stream and the risk management techniques and capital markets know-how required in this business. Historically, this unit concentrated on real estate investments, however now its activities are much broader, spanning renewables and infrastructure as well as direct and indirect private equity investments in venture capital and buy-out funds. "In all of these areas an understanding of the capital markets is central to our evaluations of the risk and return profiles of investment opportunities," he commented.
Less volatile than listed investments where market values are often dependent on market psychology, AAA Holding can take a mid to long term view of its investments. Its involvement in windparks for example, project a return over a 15-25 year period. Private equity investments may be on a shorter basis dependent on the cost of capital and equity market levels. "The objective for us is clear, " Puetter concluded, "we use the widest scope of competence to generate higher and absolute returns."
As with all content published on this site, these statements are subject to our Forward Looking Statement disclaimer, provided on the right.
Less volatile than listed investments where market values are often dependent on market psychology, AAA Holding can take a mid to long term view of its investments. Its involvement in windparks for example, project a return over a 15-25 year period. Private equity investments may be on a shorter basis dependent on the cost of capital and equity market levels. "The objective for us is clear, " Puetter concluded, "we use the widest scope of competence to generate higher and absolute returns."
As with all content published on this site, these statements are subject to our Forward Looking Statement disclaimer, provided on the right.
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