Asset Management

For the Long Haul The cumulative expertise of the members of the BBH Team that advises insurance clients, and the research and resources they bring to the task, is extensive with an average of over 20 years of experience within the industry.

B

rown Brothers Harriman are investment managers to more than 40 insurance entities. Investment grade fixed income management is the mainstay of its Insurance Asset Management practice.Best’s Review caught up with Cameron Laird, a senior

vice president and head of insurance asset management to find out more. BEST’S REVIEW: Can you describe Brown Brothers Harriman’s

Insurance Asset Management Practice? LAIRD:We’ve been managing investments for insurance companies

since the 1940s, and we currently manage a little over $4.8 billion in assets for insurance companies covering a wide range of insurance enti- ties from captives to traditional property and casualty to other special- ized risk managers. I’ve been with BBH for two years but have been in the investment business for 29 years all of which has been in the insur- ance asset management space. I was appointed earlier this year to head the insurance asset management practice, and in that role it’s my job to ensure the investment management capabilities of BBH are fully utilized to meet the unique investment needs of insurance companies and to be mindful of their specific investment objectives and constraints. BR: What investment issues are of particular importance for

your captive clients at the moment? LAIRD: Probably the single biggest issue is how to deal with

the current low interest rate environment. We have market interest rates now at near historic lows and that presents a number of chal- lenges to our captive clients. BR: How should captive insurance companies be thinking about

their investments considering the low rate environment we’re in? LAIRD: There are a number of steps our captive clients can take

to help alleviate the pressures of the current low yield environment. Firstly, we recommend that a significant proportion of our client’s fixed income portfolios be allocated to high quality credit sectors, that is nongovernment sectors. We think there is value to be found using a selective approach to sectors such as corporate bonds, asset backed securities and other “credit” sectors. Also, we recommend that captive insurance companies consider increasing their equity allocation subject to their own internal risk budget. And lastly, we encourage captive cli- ents to consider TIPS (Treasury Inflation-Protected Securities) both as protection against inflation and as a good diversifying asset. BR: What about inflation risk concerns? LAIRD: At Brown Brothers Harriman, our base case expectation is

for a relatively tame inflation environment over the near term. However, there is a distinct risk that the stimulative measures taken by the Federal Reserve could lead to unexpected inflation pressures going forward. To protect insurance company portfolios, we recommend consideration be given to a TIPS allocation. The good news at present is that from a tactical perspective, the insurance provided by TIPS is fairly inexpensive. Further, our research has shown that TIPS can enhance diversification in that they can improve the risk adjusted return potential of a portfolio previously consisting only of traditional fixed income instruments. BR

Click here to isten to the full interview Best’s Review August 2010

Cameron Laird

Senior Vice President & Head of Insurance Asset Management

“

We provide strong tactical management, strategic and administrative advice and services that are responsive to industry needs.

”