Emerging Frontiers Resilience of Insurance and Private Fixed Income Portfolios

This report examines the resilience of US life insurance portfolios to private fixed income stress, concluding that robust capitalization and reserve buffers allow the industry to weather severe drawdowns.

Key Takeaways

• 1.US life insurers maintain robust capitalization despite high private fixed income exposure, with average RBC ratios at 429%, well above regulatory intervention thresholds.
• 2.Stress testing using Moody's CLO loss assumptions shows minimal impact on RBC (declining 20 points), with impairments fully absorbed by existing Asset Valuation Reserve (AVR) buffers.
• 3.A highly punitive 15% blanket haircut across all private holdings results in average RBC ratios of 296%, proving that even severe systemic shocks are unlikely to trigger mass insolvency in the sector.

Table of Contents

• The long-term view
• A match made in heaven – life insurance, please meet covenants, spread and duration
• New frontiers – current environment and insurance adoption
• Place-setting – How are the largest US lifers in private fixed income currently capitalized and positioned?
• Stress scenarios – can our industry weather a more systemic storm across private fixed income?
• A new horizon awaits – steadfast underwriting, manager diversification and vintage jurisprudence shall guide our path
• Methodology & Sources

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