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Policy owners must avoid projecting today's economic environment forward for an extended period, causing them to choose products that lock in long-term mortality and interest rates. Such a move not only virtually ensures long-term underperformance but also sacrifices the flexibility necessary to take advantage of conditions as they change.

In light of the current environment, it is easy to lose sight of the proven policyholder protections that the life insurance industry continues to provide, including regulatory and third-party oversight, as well as mechanisms to support policyholders of troubled companies.

Researchers examine 50 years of historical S&P 500 Index data and compare the actual tail risk frequency and magnitude to the expectations of a typical investor operating under modern portfolio theory. The difference between the two is surprising, and it suggests that investors have significantly underestimated tail risk frequency and severity.

A well designed absolute return portfolio should not encounter the frequency or magnitude of declines associated with volatile growth portfolios. The absence of large losses is the hidden strength of the approach, acting as a strong suppressant to investors' inherent fear biases, which, in turn, allows for a more consistent compounding of wealth over time.

Politics still seem to trump economics in the United States and Europe, although a renewed U.S. downturn seems avoidable and Greece is likely to move ahead with an orderly default. Now may be the time to consider a modest increase in equity risk positions, particularly for information technology and financials.

Many commercial real estate markets experienced a debt-financed investment boom, similar to housing, before the economic crisis. That trend is about to boomerang as numerous portfolios are up for refinancing. Sizeable refinancing risks loom, particularly in markets with sharp price corrections from 2005-2007, a poor economic outlook, or both.

Investors strive to act prudently and to generate good risk-adjusted returns. But what happens when these two objectives are in conflict? The author discusses the conditions under which these goals may be incompatible and offers suggestions for minimizing the opportunity costs that arise when prudence gets in the way of returns.

A sustained level of volatility may actually benefit long-term commodity investors. Tightening supply/demand conditions may lead to potentially higher long-term returns and investors can capitalize on the shape of the futures curve by taking advantage of short-term supply stocks to generate alpha.

Trading policies implemented after the flash crash of May 2010 have reduced the level of individual stock dislocations but have not eliminated market volatility, which has persisted and even increased. Investors should seek protection from economic and market risks but without blindly forfeiting long-term returns.

The major rating agencies have published a number of reports highlighting the favorable trends for the life/annuity and health insurance industry. This paper provides a synopsis of recent reports from A.M Best, Standard & Poor's, Fitch and Moody's.