The latest in the 2023 series of AILO Survey Reports focuses on finance and, in particular, on the topic of capital management and is available now exclusively to AILO Members.

In outline, life insurance is a very simple business.

A life company receives premiums, invests or manages them prudently and then pays out to policyholders when specified events such as a death occurs, or when a policyholder chooses to cash-in their investment.

As is common in life and life insurance in particular, things are not quite so straightforward. What happens to those premiums and how they are managed is critical to the outcomes customers demand from product providers and forms the basis of trust on which the sector continues to exist.

‘Capital Management’ is the collective name given to a range of techniques and tools deployed by life companies to manage the risks associated with these commitments to policyholders. For life insurers, capital management is a crucial aspect of their overall financial strategy. It involves the allocation and utilisation of financial resources to ensure that insurance companies have adequate capital to cover their obligations and withstand unexpected losses, whilst using that capital efficiently.

In the case of most AILO Members, their insurance operations primarily involve relatively straightforward unit-linked business. Historically, these companies found capital management to be a reasonably simple task under previous solvency regulations. However, the introduction of risk-based solvency frameworks like European Solvency II or Isle of Man Risk-Based Capital has heightened the complexity of capital management.

The survey sought to identify what capital management tools Members are using, the challenges they have encountered in managing their company’s finances and what capital management tools they plan to use over the next three years.

The main findings of this survey are as follows:

  • The greatest capital management challenge highlighted by a majority of respondents, is meeting shareholders’ dividend expectations.
  • Traditional reinsurance risk management is used by all respondents to assist in capital management.
  • After using these tools, nearly 90% of respondents rated them as somewhat or very effective, with a majority rating them as very effective.
  • Implementing capital management tools can be challenging, with regulatory approval, cost and internal resources highlighted as the most significant challenges to overcome.
  • Two thirds of respondents are not averse to using existing or new tools in the future as circumstances require.
  • The most favoured tools chosen by the insurers surveyed were expense outsourcing, management actions and financial reinsurance.

The Capital Management Survey Report was compiled by Rob Frize, Director at Milliman, an AILO Associate Member, who commented:

“I’d like to thank all the AILO Members that contributed to the survey and provided their thoughtful responses. The results reveal a useful snapshot on the many and varied techniques being utilised by AILO Members in this key area of cross-border life business. The survey indicated a high level of usage of these tools to help with capital management. It also highlighted some of the main challenges insurers face in implementing them and the willingness of AILO Members to considering using the range of tools in the future”.

AILO CEO Bob Pain commented:

“Thank you to Rob for his excellent work, and to all of the Members who participated in this survey. Only through the vehicle of AILO is it possible to obtain such multi-jurisdictional dimension on an issue of such relevance to the cross-border life sector.”

The full Capital Management Survey Report is available exclusively to AILO Members, along with the Distribution Survey Report, the Technology Survey Report and the Global and European Cross-Border Life Market Reports published earlier this year. These reports provide valuable industry insights and are available from

If you want to read the full reports but are not an AILO Member, click here for details about how to join.

Rob Frize, Director, Milliman
AILO Capital Management Report Author