Life Insurers’ CLO Investments Could Pose Big Risks, Fitch Says
- Credit quality of U.S. holdings has declined since crisis
- Investments in A-rated bonds fall, while BBB holdings climb
Pedestrians walk past the New York Stock Exchange.
Photographer: John Taggart/Bloomberg
This article is for subscribers only.
U.S. life insurers have loaded up on collateralized loan obligations since the financial crisis. Those CLOs might prove troublesome in the next recession, Fitch Ratings said.
Insurers’ portfolios have become more risky since 2007 as corporate bonds were downgraded, highly rated bonds became scarcer and investors sought higher yields to counter low interest rates, the credit-rating firm said in a report released Thursday. While most insurers have enough cushion to deal with a moderate economic slowdown, a more severe slump could drag credit ratings down, Fitch said.