Corporate Bond Exposures: Trifectas, Triple Plays & Triple-Bs

April 28, 2020 — Since the Great Financial Crisis, insurance companies have been pursuing a number of yield-enhancing strategies: extending durations, lessening liquidity requirements and lowering credit quality standards. With this, exposures to BBB-rated corporates has never been higher, either in dollar terms or as a percentage of assets.

At this stage of the cycle with an impending recession, the risk of downgrades, defaults and price impairment become a bit more problematic. Insurance companies need to take a deep dive into the research of their BBB-rated exposures in order to control risk, maintain capital efficiencies and to reduce the volatility of capital and surplus. If the smaller-to-midsize insurance companies do not have the necessary resources and experience, partnering with Sage is an attractive alternative.