Aon and Goldman Sachs have partnered to launch a captive investment service.
According to Aon the service “seeks to make it easier for captive insurers to identify and access appropriate, high quality and yield-enhancing investments”.
The service will be offered by the Global Investment Service at Aon, working with its Captive and Insurance Management Group (ACIM).
It involves Aon providing advice, fund research and execution services using a specially tailored investment platform created by Goldman Sachs using its liquidity solutions portal Mosaic.
This combination is a “one-stop shop for captives to manage their assets from trading Aon-rated funds and viewing daily portfolio information, to automated reporting” according to the captive manager.
The service had an initial launch on 1 October in Ireland and Aon is now making it available globally.
Aon’s captive team works with captives with over $175 billion of assets, while the global investment practice advises clients with more than $3.5 trillion of assets.
“The new Aon United service leverages this combined insight and expertise to advise captives on a broad range of investment opportunities and introduce captives to the platform as an avenue to access these opportunities. At its launch on 1 October 2020, a selection of Aon buy-rated mutual funds from four prominent fund managers were available on the platform, with further additions expected as the service expands,” Aon stated.
Head of Insurance Solutions in Aon’s global investment unit, Tim Currell, said that captives have favoured low-risk investments since 2008 but that the landscape is changing.
“We believe that there are some simple steps that captive insurers can take to improve their expected investment outcomes without increasing risk – and this new service gives them the means,” he said.
“Since the global downturn in 2008, we have seen some captives favour a low-risk approach to asset management, with some holding a significant portion of their assets in cash deposits.
“Given the prolonged low global interest rates over recent years, this has resulted, for some, in low or negative returns with assets potentially losing value in real terms. This challenging dynamic has been accentuated during the Covid-19 crisis.”
Michael Siegel, global head of the Insurance and Liquidity Asset Management business at Goldman Sachs, said that they were excited to work with Aon on the project.
“We are excited to partner with Aon and to provide a new range of asset management products from an array of asset managers to Aon’s captive insurance client base,” Seigal said. “Market volatility has changed what firms invest in for cash management purposes and how firms invest. We look forward to working with Aon to bring technology solutions to the forefront of liquidity and other risk considerations.”
Currel said that captives should be diversifying during the current global situation, and that Aon’s service can help.
“Captives could instead be diversifying into areas such as money-market funds or introducing other highly liquid assets,” he said. “We know that deciding what to invest in and finding high-quality fund managers can be a challenge – most captives don’t have in-house teams with significant resources or the expertise to do this. Complying with the reporting requirements for this kind of portfolio management and trading can also present a new operational burden.
“But with the combined expertise to bring the best of Aon to our clients, this service offers captives a means to make the most of a broad range of investment opportunities – and with that the potential to improve outcomes while not having to take on the extra operational and compliance burdens themselves.”