Tag: Jean-Baptiste Carelus

Collateralized Loan Obligation – Stress Testing U.S. Insurers’ Year-End 2021 Exposure

Mary Pat Campbell

Link: https://content.naic.org/sites/default/files/capital-markets-special-reports-clo-stressed-analysis-ye2021.pdf

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Excerpt:

The stress test analysis found that 1,114 U.S. insurers, with a surplus of about $1.2 trillion, held some
amount of CLO tranches modeled. Similar to last year’s stress testing results, we found that the losses on
insurers’ CLO investments that were modeled, even in the stressed scenarios, were highly concentrated.


To understand the impact of potential losses on insurers, principal loss (compare with Table 7) for
scenarios A, B, and C was divided by each insurer’s year-end 2021 total surplus. For each scenario, the
principal loss as a percentage of total surplus for each of the 1,114 insurers was sorted from highest to
lowest. Then the insurer with the largest percentage loss was referenced as “Insurer 1,” the insurer with
the second largest percentage loss was referenced as “Insurer 2,” and so on until the smallest percentage loss, which was referenced as “‘Insurer 1,114” (x-axis). Please note the difference in the scale of the y-axis
in Charts 1, 2, and 3.


Chart 1 shows the distribution of losses as a percentage of surplus for December 2021’s Scenario A.
Although the bulk of insurers show no losses, 49 of the 1,114 insurers experienced losses in this
scenario. Intuitively, the losses were derived primarily from CCC-rated CLO tranches. The largest loss as
a percentage of surplus under Scenario A was 9.72%. Similar to the analysis for year-end 2020, no
insurers experienced double digit losses.

Author(s): Jean-Baptiste Carelus, Eric Kolchinsky, Hankook Lee, Jennifer Johnson, Michele Wong, Azar Abramov

Publication Date: Jan 2023

Publication Site: NAIC Capital Markets Special Reports

Private Equity (PE)-Owned U.S. Insurers’ Investments Decrease as of Year-End
2021; Number of PE-Owned U.S. Insurers Increases

Mary Pat Campbell

Link: https://content.naic.org/sites/default/files/capital-markets-special-reports-PE-owned-YE2021.pdf

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Excerpt:

The BACV of total cash and invested assets for PE-owned insurers was about 6% of the U.S. insurance
industry’s $8.0 trillion at year-end 2021, down slightly from 6.5% of total cash and invested assets at
year-end 2020. The number of PE-owned insurers, however, increased to 132 in 2021 from 117 in 2020,
but they were about 3% of the total number of legal entity insurers at both year-end 2021 and year-end 2020.

Consistent with prior years, U.S. insurers have been identified as PE-owned via a manual process.
That is, the NAIC Capital Markets Bureau identifies PE-owned insurers to be those who reported any
percentage of ownership by a PE firm in Schedule Y, and other means of identification such as using
third-party sources, including directly from state regulators. As such, the number of U.S. insurers that
are PE-owned continues to evolve.1
Life companies continue to account for a significant proportion of PE-owned insurer investments at
year-end 2021, at 95% of total cash and invested assets (see Table 1). This represents a small decrease
from 97% at year-end 2020 (see Table 2). Notwithstanding, there was a slight increase in PE-owned
insurer investments for property/casualty (P/C) companies, to 4% at year-end 2021, compared to 3% the
prior year. In addition, there was also a small increase in total BACV for PE-owned title and health
companies’ investments, at about $1.1 billion at year-end 2021, compared to under $1 billion at yearend 2020.

Author(s): Jennifer Johnson and Jean-Baptiste Carelus

Publication Date: 19 Sept 2022

Publication Site: NAIC Special Capital Markets Reports

U.S. Insurer Exposure to Russia, Ukraine, and Oil/Gas Companies Declines from 2020 to 2021

Mary Pat Campbell

Link: https://content.naic.org/sites/default/files/capital-markets-special-reports-Russia-Ukraine-Oil-Gas-YE2021.pdf

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Excerpt:

Total Russian and Ukraine sovereign and corporate debt was $813.3 million at year-end 2021,
representing 97% of total exposure; the remainder comprised $28.8 million in stocks (see Table 2).
While life companies accounted for the majority of the bond exposure at $683.9 million (or 84% of total
Russia and Ukraine bonds), property/casualty (P/C) companies accounted for almost all the Russia and
Ukraine stock exposure at $28 million. About 90% of U.S. insurers’ exposure to Russia and Ukraine
bonds and stocks was held by large companies, or those with more than $10 billion assets under
management.

Author(s): Jennifer Johnson, Michele Wong, Jean-Baptiste Carelus

Publication Date: 14 Apr 2022

Publication Site: NAIC Capital Markets Special Reports

Equity Market Volatility Spikes to Start 2022

Mary Pat Campbell

Link:https://content.naic.org/sites/default/files/capital-markets-hotspot-Equity-Market-Drop-Jan-2022.pdf

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Both economic and geopolitical factors have caused some volatility in the financial markets, including a
recent significant decline in equity markets into “correction territory,” or a decrease greater than 10%.
Equity markets have been declining over the last few weeks after reaching a record high at the
beginning of 2022 when Standard & Poor’s 500 Index (S&P 500) reached almost 4,800. On Jan. 24, the
S&P 500 was down as much as 2% intraday, but it rebounded to finish the day up 0.3%. Volatility
continued into the following trading day, with the index declining 1.2% on Jan. 25.

Author(s): Jennifer Johnson, Michele Wong, and Jean-Baptiste Carelus

Publication Date:25 Jan 2022

Publication Site: NAIC Capital Markets Bureau

U.S. Insurance Industry Outsourcing to Unaffiliated Investment Managers
Unchanged From 2019 to 2020

Mary Pat Campbell

Link:https://content.naic.org/sites/default/files/capital-markets-special-reports-IM-Outsourcing-YE2020.pdf

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Excerpt:

The percentage of U.S. insurers that reported outsourcing investment management to an
unaffiliated firm has remained relatively unchanged at year-end 2020, compared to the last
several years; it was about half of all U.S. insurers, dating back to at least 2016.
Consistent with prior years, small insurers, or those with less than $250 million in assets under
management (AUM), accounted for the largest percentage, or 63% of the total number of U.S.
insurers, that outsourced investment management.
Property/casualty (P/C) companies continue to account for almost 60% of the total number of
U.S. insurers that outsource to unaffiliated investment managers.
For U.S. insurers that named the unaffiliated investment management firms that they utilize,
BlackRock, Conning, and New England Asset Management Inc. (NEAM) have been the top three
most-named investment managers over the last few years.

Author(s): Jennifer Johnson and Jean-Baptiste Carelus

Publication Date: 18 Jan 2022

Publication Site: NAIC Capital Markets Special Bureau

U.S. Insurance Industry’s High-Yield Bond Exposure Grows Following COVID-19-Related Credit Deterioration in 2020

Mary Pat Campbell

Link: https://content.naic.org/sites/default/files/capital-markets-special-report-covid-related-credit-deterioration.pdf

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Excerpt:

At year-end 2020, the U.S. insurance industry reported $286 billion in high-yield bond exposure,
an increase of just over 25% compared to year-end 2019 due in part to the broad-based credit
impact of the COVID-19 pandemic.

High-yield bonds accounted for 6.1% of the industry’s total bond exposure, the highest level in
more than 10 years and an increase from 5.1% at year-end 2019.

High-yield corporate bonds, asset-backed securities (ABS) and other structured securities, and
private-label commercial mortgage-backed securities (CMBS) were the primary contributors to
the increase in high-yield exposure.

Author(s): Michele Wong and Jean-Baptiste Carelus

Publication Date: 6 August 2021

Publication Site: NAIC, Capital Markets Special Report