BlackRock finds more risk assets at insurers than in '08
In a decade of low interest rates, they have had to venture beyond traditional holdings of vanilla bonds.
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INSURERS got burned badly in the 2008 financial crisis. So almost a decade later, BlackRock Inc scoured the industry's US$5 trillion in US investments to figure out how they would fare if markets crash so hard again. The answer: It could be worse.
The world's largest money manager mined regulatory filings of more than 500 insurance companies and modelled their portfolios in a similar downturn. The stockpiles - underpinning obligations to policyholders across the nation - would drop by 11 per cent on average across more than 260 property and casualty insurers in that group, according to its calculations. That's significantly steeper, BlackRock estimates, than their "mark-to-market" losses during the depths of the crisis.
The reason is pretty simple. Insurers needed to make up shortfalls after the crisis. But in a decade of low interest rates they had to venture beyond their traditional holdings of vanilla bonds. They now own vast amounts of stocks, high-yield debt and a variety of alternative assets - a bucket that can include hard-to-sell stakes in private equity investments, hedge funds and real estate.
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