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Life Health > Running Your Business

Milliman: Hedging Has Been Working

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Index futures, interest rate swaps and options seem to be doing a good job of helping insurers hedge against the current investment market downtown, actuaries say.

Actuaries at Milliman Inc., Seattle, which helps insurers set up hedging programs, say 15 of the 16 insurers that responded to a hedging survey say hedging programs either kept account values stable, produced an unexpected profit, or, in 3 cases, held losses to less than 0.1% of asset value.

Only 1 participating insurers says its hedging program has lost 0.5% or more of the hedged asset value, the actuaries report.

When losses have occurred, they have been the result of factors such as a basis mismatch, volatility and increases in the cost of hedging, the actuaries say.


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