In this episode of A.M. BestTV, Michael Siegel, global head of insurance asset management at Goldman Sachs Asset Management, discusses potential inflationary impacts on property/casualty insurers' surplus, reserve adequacy and fixed-income investments. Siegel says inflation risk affects all aspects of a property/casualty insurer's balance sheet, and believes now may be a good time to evaluate how portfolios might perform in various inflation scenarios. In particular, Siegel said inflation typically leads to rising interest rates, which directly negatively affects the value of the fixed income portfolio. Additionally, Siegel said inflation makes it difficult to maintain the purchasing value of long-term investments and assets. To shore up inflation-sensitive balance sheets, Siegel said investors should "take a good look at all floating rate asset classes," along with Treasury Inflation-Protected Securities (TIPS), inflation swaps, real-estate and equity assets, and certain master limited partnerships. Click on http://www.ambest.com/v.asp?v=inflation114 to view the video program.

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