SCR Calculator User Manual

Version 1.13.2.0 Last modified 2024-3-21

Overview

The SAA Form is designed for asset allocation optimisation and investment strategy value appraisal from balance sheet perspective.

It aims to work out the best allocation plan for each of a range of target return levels, minimising risk (measured by volatility) and subject to a set of user-defined constraints. Constraints can involve rating, duration, SCR, ESG and other ad hoc measures. Such optimisations involve advanced maths and can be difficult to perform in a spreadsheet. To integrate such calculation with insurance-regimes is even more challenging. Hence this module.

A typical use case is to start from a specific investment allocation, and:

  • Perform a constrained optimisation to observe the efficient frontier based on current investible universe.
  • Introduce one or two new strategies and re-run the optimisation, to observe how much the efficient frontier has expanded.
  • Compare different candidate strategies this way, and decide which one provides the most risk/return/capital value-add.
  • Add more constraints to reflect our allocation policy, and gradually arrive at a concrete, practical allocation plan.

It includes a powerful constraint-defining facility and is suitable for use by not only insurance investors, but also pension funds, sovereign funds, family offices etc. where a set of institutional asset allocation targets and constraints apply.

The tool is suitable for sales pitchbook building. The set of PowerPoint charts that it can produce are highly expressive, industry-standard charts, and are otherwise quite time-consuming to build by hand.

The tool is also suitable for a live demo. Since the optimisation process is instant, outputs are more credible than static outputs presented in a pitchbook printed with a few days' delay.