Fed Researchers See Life Insurers Filling Up on Junk Assets
March 25, 2025 by Allison Bell
Tough critics of U.S. life and annuity issuers’ investment portfolios are back with a new paper suggesting that the assets are looking worse.
“Partnerships between life insurers and asset managers have created complex and arguably opaque structures to increase investment returns,” according to the new paper, which was written by four economists affiliated with the Federal Reserve Board. “These arrangements seek to shift portfolio allocations towards risky corporate debt while exploiting loopholes stemming from rating agency methodologies and accounting standards.”
Wink’s Moore on the Market: I hear a ton of people talking about this issue lately…
ThinkAdvisor‘s Allison Bell says that, “Fed Researchers See Life Insurers Filling Up on Junk Assets.”
Here’s a snippet of what’s in the new paper, which was written by four economists affiliated with the Federal Reserve Board.
“Insurance regulators and rating analysts have argued that analysts and researchers coming from the world of banking may create flawed analyses of life and annuity issuers because they focus too much on sudden, rare emergencies that lead to big calls for cash and too little on the need to meet obligations to insurance policyholders and annuity contract holders.”
“These arrangements seek to shift portfolio allocations towards risky corporate debt while exploiting loopholes stemming from rating agency methodologies and accounting standards.” -sjm
