P&C Insurers: Moving Up in Credit Quality
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.
