Once you’ve steered through the immediate capital and liquidity stresses of the crisis, it will be important to focus on the longer-term capital management impact of lower interest rates, greater hedging costs, heightened market volatility and defaults, and increasing tax rates. The markets will reward those most adept at optimising their balance sheet position and efficiently deploying and freeing up capital. The pre-crisis emphasis on offering fewer investment guarantees and more fee-based services will intensify.

Action points

• Assess product design and pricing, especially where investment returns are priced in and tax advantages are expected.

• Revisit back books, for both life and general insurance, where the market offers more efficient runoff options.

• Assess your investment portfolio, macro and micro hedge strategies, and future asset allocation options in light of anticipated recovery scenarios and changing liability risk profiles.

• Evaluate your legal entity structure and operating jurisdictions to release trapped capital and strengthen inter-company liquidity.

• Consider strategic mergers and acquisitions options.

Outcomes to target

• Stable solvency

• Stronger shareholder backing

• Increased funds for investment

• Improved return on capital

You are required to choose a particular business or industry and discuss how this strategic objective of the PWC framework applies to the chosen business or industry. Word limit 250 words.