Does your hedge do what it says on the tin? Hedging strategies for insurers: effectiveness in recent conditions and regulatory treatment. Report of the Risk and Investment Working Party

Document description

This paper looks at some of the most popular hedges for with-profits and annuity funds within UK life insurance companies. We report on regulatory requirements and current treatments before comparing performance of underlying assets and the hedging assets over both the benign period from 1 January 2004 to 30 June 2007 and the stressed period since 1 July 2007.

We then look at some of the practical issues in using the hedges that have become apparent during the recent stressed conditions before drawing our conclusions on the appropriateness of the hedges examined and common