While market yields have risen, insurers’ book yields remain low—making it difficult to keep up with claims inflation or compete with higher-rate banking and money-market savings products.
It will take a long time to recycle book yield into market yield if insurers continue to re-invest coupons into core bond markets while waiting for their current bonds to mature. To cut back that time, many insurers are looking at re-investing proceeds into extended, alternative and private-markets credit, in order to harvest a yield pick-up relative to core fixed income. We consider some of the opportunities they can take.
