In our first post of the “Insurers and COVID-19” series, we analyzes the public equity portfolios of P&C insurers during this turbulent time.
This paper examines the U.S. commercial mortgage loan (CML) market and U.S. insurers’ investments in CMLs.
Since the financial crisis, for a relatively liquid investment CLOs consistently have had the highest spreads net of capital costs for US life insurers.
We raised the probability of Recession to 55% after virus-induced shocks, oil prices’ collapse and violent market volatility. We are de-risking, adding very high quality duration, while expecting credit markets to cheapen and reserve currencies to do well
Reaching for yield, which we define as buying bonds with wider spreads after controlling for sector and rating impacts, is a topic that frequently arises in the life insurance industry.
In this paper, we assess the potential risks associated with such a strategy by stressing capital requirements using spread-implied ratings.