The surplus portfolio components of insurance companies’ portfolios have very low liquidity requirements. These portfolios are managed to generate high returns and generate greater surplus through portfolio growth. Low liquidity equity investments, including venture capital, are used to accomplish this goal.
The fixed income segment of life insurance company portfolios has a relatively high liquidity requirement. Asset-liability mismatch, disintermediation, and asset marketability risk all contribute to the relatively high liquidity requirement.
For non-life insurance companies, the fixed income segment of their portfolios has a relatively high liquidity requirement due to the uncertainty of claims.
