UNIQA has been using SimCorp Dimension for asset management since 2004. SimCorp Dimension replaced a number of legacy applications and harmonized the IT landscape across Europe, making it possible for all capital assets to be included in the market risk calculations across the company.
The low-interest challenge
In 2011, UNIQA launched ‘UNIQA 2.0,’ a long-term growth strategy program designed to concentrate on profitable growth in UNIQA’s core business as a direct insurer. UNIQA 2.0 introduced various new tactics and strategies in order to mitigate the challenges presented by a persistent low-interest environment. This included implementing a sustainable approach for asset liability management, taking into account the particular sensitivities of a structured portfolio containing capital assets compared to the underwriting liabilities. In addition, UNIQA 2.0 looks intensively at UNIQA’s product strategy and profitability control in the framework of a risk-return approach.
Because of the risk-return trade-off, it is imperative to be aware of the risk tolerance when selecting investments. Taking on some risk is the price of achieving returns; therefore, in order to increase returns, it is impossible to eliminate all risk. The goal instead is to find an appropriate balance and to manage the risk effectively.
Growing relevance of structured products
In recent years, the markets for structured products and exotic derivatives have experienced tremendous growth in both size and variety. Traditional and new asset classes are used in innovative ways to create instruments tailored for specific investment objectives. While this represents new investment opportunities, it also poses new operational challenges and risks.
Structured financial products are characterized by a combination of several basic financial products, which are different in terms of price sensitivity and risk profile, making them more complex in terms of pricing and management. The diversity and quantity of structured products on the market make it even more difficult to gain an overall overview.
In low-interest periods, excellent risk-return profiles make structured financial products increasingly attractive for institutional investors, despite the narrow regulatory limits set by law for the insurance industry.