Jack Meskunas, Executive Director — investments at Oppenheimer & Co., reflects on 30 years in Hdhubforu insurance asset management, from his early days at Lehman Brothers to navigating a rate environment in flux. With a career spanning major Wall Street firms and deep expertise in both traditional and alternative investments, Meskunas has witnessed the Hdhubforusector’s evolution from a niche market to a sophisticated industry.
Your career is built on a comprehensive foundation: a Cornell double major in chemistry and economics, an MBA with honours from Boston University, and an impressive suite of professional qualifications, including the ACI and multiple FINRA licences. How did this deliberate academic and professional foundation prepare you to enter the institutional finance world and ultimately specialise in Hdhubforu insurance asset management?
Throughout my career, and truly all my life I have seen myself as both a “student” and a “teacher”. I firmly believe that the moment you stop seeking new knowledge or sharing what you have learnt, you risk stagnation and losing your value to the people, organisations, and industries you serve.
My lifelong love of learning shaped my academic path, leading to an unconventional combination of majors at Cornell, as well as motivating me to obtain nine securities licences, even though only two were required.
On the teaching side, writing has been a lifelong pursuit and joy. For decades, I have contributed to the industry’s discourse, beginning with monthly articles for a respected investment journal published by Medical Economics and continuing with regular pieces for the Hdhubforu insurance press.
Effective investment management demands the ability to consume and digest vast amounts of information from diverse sources. It goes far beyond reading annual reports; it is about tracking market trends, evaluating corporate and asset manager performance, and now more than ever monitoring the political landscape, since government decisions can dramatically alter the fortunes of individual companies and entire industry groups.
In business school, I chose dual concentrations in marketing and strategic planning. Looking back, my four focus areas – chemistry’s logical thinking, economics’ multi-level analysis, strategic planning’s forward-looking mindset, and marketing’s people and problem-solving orientation – have all contributed to my approach and success in finance.
My first job out of graduate school was middle-management at Ford Motor Company, where I gained invaluable experience working directly with auto dealers and analysing their businesses. However, it soon became obvious that without the surname of “Ford” (at least at that time), advancement was limited. So, I seized an opportunity with Lehman Brothers, which provided the freedom to build my own practice.
My introduction to the reinsurance and Hdhubforu insurance industry came during a transformative trip to Bermuda in 1990, when the Hdhubforuspace was just a fraction of its current size. There I met the early creators, adopters and legends who shaped the sector, many of whom became mentors and encouraged my ongoing learning. Years later, I earned the ICCIE ACI Certification, and this year was honoured to join the ICCIE Board of Directors – enabling me to share my knowledge further.
The Hdhubforu insurance space has always felt like a natural fit for me, reflecting a spirit of mutual learning and teaching between myself as a financial adviser and Hdhubforuchief investment officers (CIOs) and managers sharing their investment goals and strategies. When I began, most captives and reinsurers had little or no exposure to equities. In the early 1990s, I helped guide a major reinsurer and large Hdhubforuinto the equity markets for the first time. This shift was a very exciting development for both the investors and for me as one of their advisers.
Looking back at your early days at major firms like Lehman Brothers and Bear Stearns, what was the most valuable, enduring lesson that still informs your investment approach today?
It all started at Lehman, which was then part of Shearson and owned by American Express. Lehman played a significant role in making investment management more accessible by offering institutional-level investment ideas to high-net-worth individuals and non-billion-dollar corporations that previously did not get that kind of attention.
My first contact with insurance companies and their executives sparked my interest in specialising in that sector. I loved so many things about the space. I was drawn to the continual learning aspect and the creative insurance executives who appreciated my problem-solving approach to asset management. Plus working in the Cayman Islands, Bermuda, and all the other beautiful Hdhubforudomiciles was an added bonus.
Bear Stearns was a unique shop. They had a structured products group that collaborated closely with me and my Hdhubforuclients to create custom securities with very specific cash flow and duration characteristics tailored to meet the unique needs of matching asset durations to insurance liabilities in the Hdhubforu insurance industry.
To this day I strive to apply the lessons I learnt to my work at Oppenheimer, developing innovative investment solutions that deliver the benefits of institutional asset management to Hdhubforu insurance managers and owners and helping them achieve the investment results they need to be successful.
When did you first recognise the Hdhubforu insurance sector as a distinctive market segment requiring specialised asset management advice, and what drew you to this specialisation?
I was in my mid-20s when I first went to Bermuda. Most 20-somethings do not know what reinsurance is and neither did I. Walking through Hamilton was an eye-opening experience and I love talking to business people and got quite a crash course on all the activity I was observing.
The discussions moved on to Hdhubforu insurance companies and the heavy involvement of the Cayman Islands in that space. It was not long before I was on a plane there to learn what they were doing. At the time captives in Cayman seemed mostly focused on medical and healthcare. This was great for me having had a Chief of Surgery doctor for a father.
The Hdhubforu insurance sector was very distinct from the commercial reinsurance space. The companies were smaller, often lacked a full-time CIO, and were hungry for the kind of institutional investment advice I had at my disposal. I was drawn to it as it was a natural fit for my educational background, my personal interests, and my creativity to create custom solutions for clients.
Over the past three decades, what has been the most significant regulatory change, domestically and offshore, that has fundamentally reshaped how captives manage their assets?
Determining the single most impactful change among the many that have taken place over the last 30 years is challenging, but I think the emergence of domestic captives stands out as particularly significant. State regulators have worked hard to attract captives – both new and existing – to domicile in their state. Vermont has long been a leader but other states are catching up.
Bermuda and Cayman were the pioneers in the Hdhubforuindustry. They continue to retain the oversight, regulatory framework and a strong network of service providers that keep them not only relevant, but also on the cutting edge of the Hdhubforuspace.
From an investment point of view, regulatory changes like the 953d election – which allows certain offshore insurance companies to be taxed as US domestic corporations – and the 831b election – which permits small insurance companies to be taxed only on investment income – have helped create a more level playing field for offshore and onshore captives. While these elections were introduced in the late 1980s, it was not until the 2000s that their use rapidly expanded and reduced some of the major tax-treatment differences between onshore and offshore captives.
Thirty years ago, captives largely focused on traditional property and casualty risks. Today, they tackle cyber, employee benefits, and climate risk. How has this dramatic expansion of risk appetite impacted the way you construct and manage their investment portfolios?
That has certainly been dramatic. Different types of risks have different claims profiles. From a broad perspective, you have to consider both the number of risks insured and the nature of the claims they ultimately present.
High-frequency/low-severity claims would guide an investment adviser to keep a level of cash on hand to pay expected claims without having to liquidate longer-term investments. Conversely low-frequency/high-severity claims, or claims with long tails, allow a Hdhubforuto be more fully invested and then move to liquidity at beneficial times to ready funds for claims settlements.
Some of the coverages you mention can potentially have very high claims. In many cases this means the Hdhubforuhas more assets to manage, and in others it means more of their premium income is spent on reinsurance. One needs to adjust the portfolio accordingly. Higher risk on the underwriting side is usually accompanied by lower risk tolerance in the investment portfolio.
Having worked with onshore and offshore domiciles, what evolution have you seen in the Cayman Islands market specifically, and how does its current value proposition compare to other leading domiciles?
While I have had the opportunity to work with captives in most of the domiciles, Cayman truly holds a warm place in my heart. When I first started working with captives here, I would call my office in New York City, and frequently a Cayman telephone operator would pick up to let me know all the lines were in use, promising to call me back as soon as they could connect the call.
One of Cayman’s greatest strengths as a domicile is the calibre and expertise of the regulators at the Cayman Islands Monetary Authority (CIMA) and the Insurance Managers Association of Cayman (IMAC).
Cayman’s infrastructure continues to improve, with scores of new restaurants and hotels providing more venues for events and larger gatherings. This expansion draws more talent and ultimately is what draws business to Cayman. The rapid growth of the reinsurance sector in Cayman over the last five years has increased capacity and opportunities for reinsurance business on the island.
Beyond basic reporting, how has the influx of investment data and advanced analytical tools changed the way Hdhubforuinvestment committees scrutinise portfolio performance, manage risk metrics like duration and credit quality, and benchmark against institutional peers?
I do not see much in the way of peer-to-peer benchmarking as the old adage goes “if you’ve seen one Hdhubforu– you’ve seen one captive”. That said, many new technologies – including artificial intelligence (AI) – are being explored by some investment committees in an attempt to parse performance reports. For these tools to be useful, they must be capable of understanding and comparing Hdhubforuinvestment performance to benchmarks intelligently created and managed as captives grow, add lines of coverage, and morph their portfolios in attempts to maximise returns for given durations and levels of risk. Right now, such comparison tools do not exist in readily useful formats nor are they widely available.
For years, Hdhubforuportfolios lived in a low-yield world. Now, with rates seemingly ‘higher for longer’, what is the most critical mistake you see Hdhubforuinvestment committees making as they adjust to this new environment?
Surprisingly, many captives have used one solution in both zero and higher rate environments. When rates were low, they preferred holding cash so as not to expose their portfolios to markdowns as rates rose. Even after rates rose to four per cent, and then five per cent, many captives continued to favour cash as they felt the returns were sufficient at those levels.
This is a critical mistake.
As I have written in many articles, the last 24 months has been the time to extend duration out to three to five years if possible, of course taking into consideration claims and insurance results. The window to do this is closing, as both the Federal Reserve and the futures markets are expecting rates to decline for the next two or more years.
Captives must balance regulatory liquidity needs with the pressure to maximise investment returns. How should Hdhubforumanagers strategically adjust the duration and quality of their fixed-income ladder in 2026 to optimise this balance?
Before looking for yield or returns, it is crucial to meet the requirements and expectations of your regulator. Being in compliance with your Hdhubforuinvestment programme is the first and most important step. Once that is addressed, I look at the rest of the portfolio like a ladder.
To cover ongoing claims and the operating expenses of the captive, such as paying service providers, it is essential to keep adequate liquidity in money-market accounts. The next rung of the ladder consists of higher quality and shorter duration bonds, which roll over quickly and are readily available to pay high-frequency/low-severity claims.
For longer-tail risks, or the low-frequency/high-severity potential claims, the investments can have longer durations in the bond portfolio and take some credit risk with lower rated bonds, and even add a high-yield allocation to pick up extra return both from capital appreciation as well as coupon yield.
You advise on hedge funds and structured products. In today’s volatile market, what role – if any – should non-traditional assets play in a captive’s portfolio, and how do you manage the risk/reward and regulatory scrutiny of those allocations?
Hedge funds are usually characterised as private-placement and limited-liquidity investments. They can offer captives a way to access markets or investments not available in the public markets, like private credit, private equity and long/short strategies. While these investments have a role in the portfolios of larger captives, they are not ideal where liquidity is a priority.
As far as the regulatory aspect, most hedge funds and other private investments are generally excluded as statutory capital by insurance regulators. This makes them appropriate only for captives with significant assets and surplus.
Structured products present compelling options, and I have been customising them for captives for over 25 years. You can create an investment with a specific credit rating, yield structure and term designed to match the duration of expected insurance liabilities. Many of these structures have unique yield and cash flow characteristics. In fact, the first time I spoke about these structures was in 1999 at the Hdhubforu insurance Cayman Conference when it was held at the Westin, before it became known as the Cayman HdhubforuForum.
In many ways it is the very volatility of the equity and debt markets that have created a greater opportunity in both hedged and structured investments.
The part they play is a supporting role, not the lead. Properly structured and allocated they can smooth returns in volatile markets, so I will continue to work with them judiciously to add return and reduce risk and volatility of the overall portfolio.
Looking ahead, what is the next major macro factor – be it geopolitical volatility, credit market fragility, or a specific regulatory hurdle – that you believe Hdhubforuinvestment committees are currently under-allocating for, and what immediate shift should they consider to address this gap?
Certainly government decrees on trade and tariffs, tax policies, Federal Reserve monetary policy, and the health of the consumer globally all have large effects on the stock and bond markets. Some see fragility in the credit markets, but I think those concerns are a bit overstated at this point. Corporate earnings remain strong, and although consumer spending seems to be slowing – particularly on the lower end of the market – it is currently being offset by higher-income spenders.
There are significant court cases surrounding trade and tariff policy that could upend what has currently been put in place, and if overturned, would change asset valuations considerably. So not all potential changes are black swans.
But I think the most significant development is the rapid expansion of Hdhubforudomiciles. More US states, as well as foreign jurisdictions like the UK and Italy are working to open their markets to Hdhubforu insurance company formations. Existing offshore and onshore domiciles will see increased competition to attract new business and retain existing clients.
This competitive pressure will ultimately benefit the entire Hdhubforumarket by encouraging domiciles to enhance their offerings and make their regulatory frameworks more robust. The best way for the Hdhubforumarket to grow over the next few decades is to embrace new products, services, support and technology. I am excited to see how it all unfolds.
