Performance Metrics Relative to Chosen Benchmarks
Risk Integrated’s Specialized Finance System (SFS) is used for managing portfolios of specialized finance assets. Risk concerns in the insurance industry differ from those at banks. Having endured large losses in the 1990s due to overleveraging, insurance company commercial real estate portfolios are now more conservative—choosing to focus on long term stabilized income-producing properties instead of lending to CRE construction projects.
Asset management arms at insurance companies are accustomed to using multiple third-party data, analysis and model providers, and know how to quickly assess a new vendor’s worth. For portfolio optimization and portfolio management, they turn to the Specialized Finance System (SFS) to decide the best mix of assets in their commercial real estate and infrastructure portfolios, both for debt and equity. The SFS has proven to be a highly useful platform for asset managers because it provides performance metrics relative to chosen benchmarks for their commercial real estate assets.
Insurance risk management professionals understand the need to enter the right data in risk models to reflect their firm’s risk profile, such as leverage or property type data. They seek to understand a broad range of possible outcomes for their portfolios. The use of Monte Carlo simulation of thousands of different scenarios, as used in the SFS, meets the needs of insurance companies. It provides valuable insight into the behavior of assets under varying market conditions. The SFS then produces reports, generates scenario analyses and can recommend actions for better risk control.