Covid Crisis Triggers Most Credit Insurance Payouts Since 2009
- Default swaps on 19 borrowers have been settled this year
- Low debt recoveries push some protection payouts close to 100%
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A corner of the $11.5 trillion market for credit protection that was all but written off after the financial crisis is thriving amid the coronavirus pandemic.
Credit-default swaps, used by investors such as Bill Ackman, Seth Klarman and Boaz Weinstein to insure debt or bet on creditworthiness, are paying out at the fastest pace since 2009. Contracts linked to 19 borrowers have been settled this year as national lockdowns and social distancing measures push more companies into bankruptcy or restructuring, compared with an annual average of 10 over the past decade.