Even Covid couldn’t stop insurers buying risky CLO tranches

NAIC rules make mezzanine debt more attractive than AAAs or corporate bonds with similar ratings

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US insurance companies invested more money in collateralised loan obligations last year, even as the Covid-19 pandemic threatened to trigger a wave of defaults on the loans backing the securities.

Life insurers held 13.1% of their assets in asset-backed securities – the investment category that contains CLOs – at the end of 2020, compared with 11.4% in 2016, according to Mary Pat Campbell who researches the sector for Conning, a specialist asset manager.

“Yields for the entire US life industry

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