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Regulators face growing risk as US insurers add illiquid debt
US life insurers held more than $2.5 trillion in illiquid investments in 2023, about 37% of total assets, up from 31% a decade earlier.
LiveMint Markets warned that regulators need a better handle on rising risk in US life insurance portfolios as insurers increasingly move away from liquid, high quality holdings.
The outlet said illiquid investments, including real estate debt and loans to smaller companies, totaled more than $2.5 trillion in 2023, or about 37% of total assets, up from 31% a decade earlier and above levels just before the 2008 financial crisis.
The shift can make asset quality harder to evaluate, since insurers may rely on confidential private ratings and invest through opaque intermediary chains, while also increasing leverage that can raise default risk when insurers have limited loss absorbing equity capital.
LiveMint Markets also pointed to changes in liabilities and reinsuring structures, including moves to offshore jurisdictions such as Bermuda, where life insurance assets reportedly exceed 150 times that country’s gross domestic product, and cited the 777 Re failure as an example of risks surfacing for insurers in the US.