European insurers’ appetite for illiquid assets, equities and lower rate corporate debt to diminish

Written by Adam Cadle

16/11/2023

European insurers’ appetite for lower rated corporate debt, equities and illiquid assets is expected to diminish, Moody’s has said, with purchases of sovereign and highly rated corporate bonds to increase.

Moody’s said this expectation is due to the recent substantial rise in bond yields and current significant economic uncertainty.

However, it added that insurers will likely reinvest in higher quality debt only as their existing bond investments reach maturity.

“This is because selling their current holdings early would crystallize unrealised losses caused by the recent sharp rise in rates. The change in the composition of their investment portfolios will therefore be gradual. Life insurers will be slower to complete the transition than their non-life peers because they hold longer dates assets on average.”

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