Credit Suisse Boosts Hedging Platform

Terry Flanagan

Credit Suisse has added a new administration and trading service to its iCPPI hedging platform to help insurance companies more efficiently manage the risks in their protected insurance products.

The new service, developed in collaboration with SunGard, will allow insurance companies to manage the risks on each individual insurance product account simply and effectively.

Insurance companies increasingly want to offer customers flexible investment products which provide customers with a wide degree of investment choice, including for capital-protection of the investment, but are also looking for the most efficient way to manage the investment risks these instruments entail.

Credit Suisse’s iCPPI Platform offers these companies the ability to protect each customer’s individually tailored account using a highly-effective investment rebalancing and hedging mechanism.

iCPPI has traditionally required large data transfers by the insurance company which may place strains on their infrastructure and systems. The new service added to the iCPPI Platform has been developed with SunGard to allow insurance companies to easily and efficiently handle that data flow and associated trading activities.

“The new service added to our iCPPI platform will provide insurance companies with the ability to offer customers a wide range of individual investment choices which are protected against future losses in a simple and efficient manner,” said Mounir Elarchi, co-head of the fund linked products business at Credit Suisse in London.

According to a recent study from Chatham Financial that analyzes the financial risk management practices of 1,075 publicly listed corporations in the U.S., more than 75 percent of mid- to-large-sized companies have exposure to foreign currency risk, yet just over half are actively managing this risk through hedging. Similarly, while more than half (53 percent) of the companies studied were found to have exposure to commodity risks, just 43 percent of those analyzed were hedging those risks via financial contracts.

“The way in which corporates manage their risks varies by industry and company size, but companies across the spectrum stand to benefit by better understanding how to approach these challenges,” said Amol Dhargalkar, managing director for risk management services at Chatham Financial. “With financial risk management reaching new levels of visibility at the senior management and board levels, these findings indicate that many corporates face considerable challenges in effectively managing their risks.”

The new administration and trading service for the iCPPI Platform is built on SunGard’s Global Network and iWorks retirement income system. The service provides connectivity, transaction processing, investor administration, and configurable product definition capabilities to monitor and manage the capital protection requirements of each individual investor.

“As protected investment and income options become more prevalent, costly modifications are required for record keeping and trading systems to support them,” said Bob Santella, president of SunGard’s brokerage business. “SunGard’s retirement income solution helps reduce the operational and technology challenges associated with the adoption of these products, while offering flexibility, portability and fewer implementation barriers for record keepers that want to offer these products.”

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