Risks and Returns Analysis of Investment Strategies in Pakistan’s Insurance Sector

Abstract

The development of insurance industry of Pakistan has witnessed enormous growth in recent years due to increasing awareness in the sphere of risk management and liberalization of financial markets. Investment strategies followed by insurance companies are very important to gain the best returns with corresponding risks. This study analyzes risk-return feature of various sorts of investment strategies adopted by the insurance firms of the Pakistani economy on equity, fixed income securities, real estate and alternative investments. Through the analysis of insurance firms and their secondary financial data and performance reports, this study highlights the correlation between the risk exposure and the returns and what strategy provides the greatest financial returns while staying within the parameters of the law. The findings imply that investment portfolio diversification with prudent risk management practices contribute to the financial stability of the insurance companies, and growth in the insurance sector. This study provides some insights to the insurers, investors as well as policy makers who are attempting to make optimized investment decisions in the evolving insurance market in Pakistan.