Report: NIB needs to diversify from investment in government bonds

According to recent actuarial reports, the National Insurance Commission (NIB) needs to expand its investment portfolio beyond government securities and small foreign bonds.

Earlier this week Guardian business As of December 31, 2018, the National Insurance Commission’s 11th Actuarial Assessment aims to ensure that the NIB has a clear funding and funding objective to ensure the fund’s obligation to provide sustainability and benefits. Reported that it was recommended to develop.

However, actuarial reports show that diversification is a way to mitigate the overall risk of a portfolio, as government bonds make up the majority of NIB’s investment and account for less than 10% of foreign investment.

“The current asset portfolio contains about 60 percent of government bonds or related investments. This is focused on some kind of risk exposure, so investment policies need to address this issue these days. In July 2014, a finance lease of approximately BSD $ 130 million was renegotiated downwards with the government. Debt restructuring has a significant impact on the social security system, where most of the portfolio is invested in government bonds. There is a possibility. “

“More detailed risk analysis needs to be included in our investment policy. Given the relative size of the Bahamas’ investment market, we can increase the allocation of foreign investment to improve diversification. December 2018 As of the month, about 7% of the investment was in external bonds, bonds and stocks.

“This low number shows that there is room to invest in private equity, real estate, infrastructure investments, and emerging markets abroad. When investing in foreign currencies, the fund may be exposed to currency risk. If the NIB decides to increase its investment in foreign currencies (or maintain its current percentage of assets in foreign currencies), it may be appropriate to adopt a strategy for managing currency risk. “

Actuarial scientists said in a report that they would contribute 2% every two years from 1 July 2022 to the end to restore the NIB’s short-term and medium-term financial sustainability (existing 9.8%). From) said to increase. Required on July 1, 2036.

They said this increase should be done in parallel with the development of clear funding and funding objectives to maintain funding in the long run.

Earlier this week, Prime Minister Phillip Davis argued that his administration would not make a significant contribution at this time due to the difficult economic situation.

Financial experts have long urged the government to consider ways to diversify the NIB’s investment opportunities in order to strengthen its funds. Report: NIB needs to diversify from investment in government bonds

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