Balance sheet management can be innovation engine: Pacific Life Re
When the topic of innovation arises, our minds are quick to jump to matters such as AI, platform development or even emerging risks. But, according to one capital specialist, that framing misses where the real transformation has more recently occurred.
Speaking exclusively to Bermuda:Re+ILS ahead of the Bermuda Risk Summit 2026, hosted by the Bermuda Development Agency on March 9-11, Michelle Moloney, EVP capital solutions at Pacific Life Re, argued the strategic shift is not product or liability-led. It is asset-led, including both investments and capital.
Moloney, who will speak on ‘Innovating reinsurance, powering growth’ as part of a panel at the event, believes “the asset side has been the area of evolution” since the 2008 crisis.
Moloney expressed innovation in the industry overall as being time sequences on targeted components of the value chain: product design in the 1990s and underwriting in the first decade of the 2000s, whereas most recently innovation is emerging through structural re-engineering of how investments, capital and risk are assembled to drive policyholder value creation and deliver enhanced affordability for consumers.
Necessity, they say, is the mother of invention. The 2008 crisis caused insurers to manage their balance sheets more tightly, driving the industry to evaluate legacy business and optimise capital.
Moloney said this approach starts with insurers “really looking at their balance sheets and cleaning them up to find the right home for risk”. This is not about scale; it is about fit; about relocating risks to platforms structurally designed to hold them to benefit the industry and its customers as a whole, much of which is either leveraging diversification or other risk management tools. With this framing, Moloney described the wave of M&A the industry is experiencing as not just consolidation, but also “finding the right home for the type of business at hand”.
This past decade, the growing pension crisis (really a tsunami) has caused insurers not just to continue their capital efficiency efforts but also to overlay additional capabilities to serve this customer need.
The industry has benefited from having new asset management entrants as well as alternative capital sources. This raised the bar toward best in kind through partnerships. Asset management depth has grown for everyone with enhanced fit, diversification and enhanced ALM capabilities. Similarly, deeper capital sources created more options and flexibility, which ultimately serve the customer.
However, it is critical to note that what we are offering is ultimately long-term promises. We need fully to commit to meeting those promises, whether 30, 40, or 100 years from now. Moreover, how we are optimising value to customers today is by partnership. Confidence for generations means we need to ensure we are all working together and aligned to this time horizon. A cornerstone to meeting this time horizon is strengthened risk management tools. Optimising risk by finding the right home and enhancing diversification is an element. ALM has tightened but innovation continues to add value here. Assets will continue to be reshaped to better fit liability cashflows and it is reasonable to expect that soon ultra-long assets will be norm.
Regulators also play a foundational role in ensuring we deliver to our policyholders. The BMA has effectively developed robust economic principles for reserves and capital. But equally importantly, it has reinforced financial strength through governance requirements and transparency. These are table stakes done well. The BMA furthers value by supporting industry evolution. Its reinsurance expertise uniquely positions it to weigh in on innovative solutions or tools and balance risk and policyholder protections again across the time horizon.
This returns to Moloney’s sentiment of “finding risk the right home”; multiple specialists combining to engineer a solution that a single balance sheet could not optimise alone.
The vision is for “all players to come together and make an optimal solution, trade by trade” – all fully aligned to deliver on this value to our policyholders long term.
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