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Insurance Solutions

P&C Insurers: Moving Up in Credit Quality

May 2024 – 3 min read

While P&C insurers are seeking more conservative strategies and risk reduction in select asset classes, they’re also moving toward illiquid assets—which provide the potential for yield enhancement.

Against the shifting market backdrop, asset allocations in property & casualty (P&C)
insurers’ portfolios continue to evolve—particularly given their focus on risk reduction and yield enhancement. With the release of 2023 statutory filings, we review the key themes emerging in asset allocations for P&C insurers.

1. Shift Away from High Yield Toward Higher Ratings

Allocations to the highest rated NAIC 1 class (A- and higher) have continued climbing since 2020, growing to 2.6% of total bonds. Within NAIC 1, AAA-rated growth has been strong, with decreases seen mainly in the AA and A-rated categories. This credit improvement has also drawn from NAIC 2 (BBB+/-), which saw a reduction of 0.9% over the past year—the first reduction since 2019. High yield allocations have declined since hitting a peak in 2021.

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Ken Griffin, CFA, ASA, MAAA

Head of Insurance Solutions

Alex Perez, CFA

Associate Director, Insurance Solutions

The document is for informational purposes only and is not an offer or solicitation for the purchase or sale of any financial instrument or service. The material herein was prepared without any consideration of the investment objectives, financial situation or particular needs of anyone who may receive it. This document is not, and must not be treated as, investment advice, investment recommendations, or investment research.

In making an investment decision, prospective investors must rely on their own examination of the merits and risks involved and before making any investment decision, it is recommended that prospective investors seek independent investment, legal, tax, accounting or other professional advice as appropriate.

Unless otherwise mentioned, the views contained in this document are those of Barings. These views are made in good faith in relation to the facts known at the time of preparation and are subject to change without notice. Parts of this document may be based on information received from sources we believe to be reliable. Although every effort is taken to ensure that the information contained in this document is accurate, Barings makes no representation or warranty, express or implied, regarding the accuracy, completeness or adequacy of the information.

Any forecasts in this document are based upon Barings opinion of the market at the date of preparation and are subject to change without notice, dependent upon many factors. Any prediction, projection or forecast is not necessarily indicative of the future or likely performance. Any investment results, portfolio compositions and/or examples set forth in this document are provided for illustrative purposes only and are not indicative of any future investment results, future portfolio composition or investments. The composition, size of, and risks associated with an investment may differ substantially from any examples set forth in this document. No representation is made that an investment will be profitable or will not incur losses. Where appropriate, changes in the currency exchange rates may affect the value of investments.

Investment involves risks. Past performance is not a guide to future performance. Investors should not only base on this document alone to make investment decision.

This document is issued by Baring Asset Management (Asia) Limited. It has not been reviewed by the Securities and Futures Commission of Hong Kong.

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