US insurer exposure to foreign investment decreases by 5% to $566bn

Written by Adam Cadle

08/10/2020

The US insurance industry’s foreign exposure (including bonds, common stocks [affiliated and unaffiliated] and preferred stocks) was $566bn in BACV at year-end 2019, representing a 5.2% decrease from $597.7bn in total foreign investments at year-end 2018.

According to a report published by the NAIC, total foreign investments represented about 8% of the US insurance industry’s total cash and invested assets at year-end 2019. Consistent with year-end 2018, life companies accounted for the largest exposure to foreign investments at 80% of the total.

Similar to previous years, the majority of the US insurance industry’s foreign investments was in bonds at $529.3bn, or 94% of total foreign investments, at year-end 2019. The largest foreign bond type was corporate, at $468.1bn, or 88% of total foreign bonds. Within corporate bonds, those in the financial sector accounted for the largest exposure at about $112bn, or 21% of total foreign corporate bonds. Foreign government bonds (which not only includes sovereign debt but other types of government bonds), represented 10%, or $51.8bn, of the total at year-end 2019.

The UK was the largest single country exposure at $106.1bn and $112.2bn at year-end 2019 and year-end 2018, respectively, and was about 20% of total foreign bond exposure for
both years. Canada accounted for the second largest country exposure at year-end 2019 and year-end 2018, at $102.2bn and $104.0bn, respectively.

Eurozone countries accounted for $140bn of total foreign bond investments (including corporate and sovereign debt), with the Netherlands representing the largest country exposure ($47.9bn).

Approximately $77.5bn, or 14% of total foreign bonds, were denominated in foreign currencies, the largest of which was the British pound at approximately $25bn.

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