Institute of Social Security of the State of Guanajuato
Mexico
Americas

Roll-out of a Liability Driven Investment strategy in the Institute of Social Security of the State of Guanajuato

Implementation year
2019

In Mexico, the Institute of Social Security of the State of Guanajuato (Instituto de Seguridad Social del Estado de Guanajuato – ISSEG) has gained in financial strength over the past 20 years. Its actuarial viability is currently projected up to 2082, assuming a real annual return on its reserves of 4 per cent.

To guarantee this viability, it is crucial to increase the likelihood of achieving this level of return and to ensure resilience to persistent inflationary shocks in the long term. In other words, to seek the long-term stability of the actuarial balance. This involves investing in financial instruments with inflation protection and a duration that reduces liquidity risks in the short, medium and long term, and aligning the maturities of these financial assets with the liquidity requirements for the payment of liabilities over the decades to come.

To reduce liquidity risks and the volatility of the actuarial balance, an investment model known as Liability Driven Investment (LDI) – or investment matching – was implemented. The main objective of this model is to cover liabilities, thereby reducing liquidity risks and the volatility of the actuarial balance.

Topic:
Actuarial
Investment
Continuity and resilience