US insurers’ CLO holdings rise by 12% to $216bn

Written by Adam Cadle

09/01/2023

US insurers held approximately $216bn in book/adjusted carrying value (BACV) of collateralised loan obligations (CLOs) at year-end 2021, an increase of 12% from $192.2bn at year-end 2020, latest figures published by the NAIC have shown.

The latest figure is also a 23% increase from year-end 2019 to year-end 2020.

Similar to year-end 2019 and year-end 2020, the Stress Thesis for the NAIC Capital Markets Bureau (CMB) and structured Securities Group (SSG) remains that the consequences of less stringent underwriting on the underlying bank loan collateral will result in substantially lower recovery rates during the next recession.

The NAIC said US insurer investments in CLOs remain an insignificant risk, However, significant CLO exposure relative to surplus and concentrated exposures to Atypical securities like Combo Notes and low-rated tranches are potential risks, particularly in a stressed environment.

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