Treasury’s Little Insurance Meltdown Glossary
December 18, 2019 by Allison Bell
A team that helps U.S. regulators look for cracks in the financial system has come out with its latest look at what could break next.
Analysts at the Office of Financial Research (OFR) have told Congress, in a new Financial Stability Assessment report, that the financial system as a whole looks pretty stable, and that capital levels at U.S. insurance companies appear to be strong.
U.S. life insurers have invested heavily in “collateralized loan obligations” (CLOs), or instruments backed by pools of loans, which sound as if they might be similar to the “collateralized debt obligations” (CDOs) that were often blamed for bringing on the 2007-2009 Great Recession.
CLOs are better than CDOs, the analysts argue, because the CLO issuers give more information about the loans backing the products, and the issuers have more tools they can use to manage risk.
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