The low yield, low interest rate environment continues to be the top financial challenge for both investment teams and chief financial officers, but most of them believe interest rates will rise within the next year.

So reports Clearwater Analytics in its 2015 Insurance Investment Benchmark Survey. More than 425 investment and accounting professionals with portfolios ranging from less than $100 million to larger than $20 billion from nearly every insurance carrier type responded to the survey. The research explores what insurance investment and accounting teams think about the investment environment, upcoming regulatory changes, different investment strategies, and operational processes and systems.

The report lists the following as the top challenges of insurers’ investment teams:

  • Yield/return on investment (34 percent of respondents)

  • Interest rates (31 percent)

  • Reporting regulatory (12 percent)

  • Asset allocation (5 percent)

  • Miscellaneous (5 percent)

  • Operational (5 percent); and

  • General strategy (3 percent)

Half of chief financial officers cite yield/return as a top challenge or concern. Nearly a quarter (23 percent) place interest rates in this category.

Given long-running expectations among market-watchers about a bump up in interest rates (now near zero), it should come as no surprise that survey participants also expect a rise in rates — and soon. The majority believe it will happen within a year (83 percent) or between 1 and 3 years (96 percent).

Most also expect the rise to be modest: up 0.32 percent within the next year, then increasing by 1.06 percent within three years and 1.75 percent over the next five years. Turning to other topics covered in the research — investments, accounting systems, risk systems and regulation — the report also discloses these findings:

  • Insurers currently investing in alternative asset classes plan to increase these allocations.

  • Solid majorities of life insurers are invested in mortgage loans, limited partnerships, private placements and real estate investment trusts (REITs).

  • Manual processes are a “major impediment” to achieving greater efficiency, preventing many insurers from closing their books as quickly as needed.

  • Those who use outsourced software-as-a-service (SaaS) solutions are the most satisfied with their investment accounting, performance, risk, and compliance monitoring. More than 4 in 10 (44 percent) of respondents say they use an outsourced solution.

  • On average, respondents need 30 hours and 50 hours, respectively, to complete quarter-end and year-end investment regulatory reports filed with the National Association of Insurance Commissioners (NAIC).

You may download a copy of “The 2015 Insurance Investment Benchmark Survey Report” here