US insurers tap CLO market as banks retreat

Widening spreads lure insurers

Former Fed chairman, Paul Volcker, architect of the Volcker Rule

US insurance companies are increasing their exposure to collateralised loan obligations (CLOs), as banks retreat from the market in the wake of new regulations.

Insurers have been lured by widening spreads on CLO tranches since the end of last year, as demand from banks has plunged amid concerns that investments in some structured securities will be disallowed under the US Volcker rule, which bans proprietary trading. Spreads have increased by as much as 15 basis points.

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