Report

Insurance Companies and the Growth of Corporate Loans' Securitization

Abstract: Insurance companies nonupled their CLO investments in the post-crisis period. This growth has far outpaced that of loans and bonds and is characterized by a strong preference for mezzanine tranches over triple-A tranches. Conditional on capital charges, insurance companies invest more in bonds and CLO tranches with higher yields but prefer the latter because these carry higher yields. Preferences increased following the 2010 regulatory reform, resulting in them holding 44 percent of outstanding investmentgrade rated mezzanine tranches. In the process, insurance companies contributed positively to the rise of corporate loan securitization and availability of bank credit, particularly to riskier borrowers.

JEL Classification: G11; G20; G22;

Bibliographic Information

Provider: Federal Reserve Bank of New York

Part of Series: Staff Reports

Publication Date: 2021-08-01

Number: 975

Note: Revised March 2025.