Extreme scenario could cause life insurers to liquidate investments reaching $1trn - IMF

Written by Adam Cadle

13/10/2021

An extreme rise in bond yields could cause the life insurance industry to liquidate investments reaching $1trn in the US and Europe, the IMF has warned.

In its Global Financial Stability Report, the IMF said the industry is at the “centre of fixed income markets” owning about 20% of global bonds and 30% of credit investments.

“A stress scenario of a large and sudden increase in bond yields and corporate spreads could induce mark-to-market losses of 30% for insurers in some jurisdictions,” the report stated.

“This could lead to the emergence of policy surrenders, forcing life insurers to liquidate investments, which, in the extreme, could reach $1trn in the United States and Europe.”

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