Insurance
Home›Insurance›Reinsurance›Insurers shift away from CLOs as regulators tighten st…
Insurers shift away from CLOs as regulators tighten structured-debt rules
NAIC data show insurer holdings of CLOs doubled from 2018 to 2022, while structured securities overall continued rising at about a 10.0% annual pace even as CLO growth slowed to single digits.
Insurance Business reports that regulators spent about four years tightening capital rules for collateralized loan obligations, a structured security backed by bundles of corporate loans, often to borrowers with junk credit ratings.
This month, the National Association of Insurance Commissioners finished the rule changes covering an estimated $314.0 billion of structured debt held by insurers, and most accounts say the final requirements were milder than the industry originally feared.
The story also highlights a regulatory lag problem, saying insurers redirected new investment toward other structured products that resemble CLOs in key ways, but were not subject to the new restrictions.
According to NAIC data cited by Insurance Business, insurer CLO holdings roughly doubled between 2018 and 2022, then CLO growth slowed to single digits as rates and regulatory signals turned less favorable, while overall structured securities held by insurers continued to climb at roughly 10.0% annually, including debt backed by student loans, auto payments, and other cash flows.