Insurance companies stand poised to combat the challenges of persistently low interest rates, tight investment grade credit spreads, and economic uncertainty by taking advantage of opportunities in public and private credit markets. Mary Anne Guediguian, account manager in the financial institutions group, Chitrang Purani, portfolio manager in the financial institutions group, and Christian Stracke, global head of credit research, discuss trends identified by  PIMCO’s Secular Outlook, “Escalating Disruption,” and their investment implications for insurance companies. PIMCO’s base-case outlook for low rates and more volatility, coupled with tight current valuations, requires insurers to be nimble and ready to diversify their credit exposures in the pursuit of stable risk-adjusted income to support policyholder liabilities.

Q: Persistently low interest rates have created significant challenges for insurance companies. How has this affected insurance company risk-taking? 

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The Author

Mary Anne Guediguian

Account Manager, Insurance

Christian Stracke

Global Head of Credit Research

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Disclosures

The continued long term impact of COVID-19 on credit markets and global economic activity remains uncertain as events such as development of treatments, government actions, and other economic factors evolve. The views expressed are as of the date recorded, and may not reflect recent market developments.

All investments contain risk and may lose value. Alternative investments involve a high degree of risk and can be illiquid due to restrictions on transfer and lack of a secondary trading market. They can be highly leveraged, speculative and volatile, and an investor could lose all or a substantial amount of an investment. Alternative investments may lack transparency as to share price, valuation and portfolio holdings. Complex tax structures often result in delayed tax reporting. Private credit involves an investment in non-publically traded securities which are subject to illiquidity risk. Portfolios that invest in private credit may be leveraged and may engage in speculative investment practices that increase the risk of investment loss. Investments in Private Credit may also be subject to real estate-related risks, which include new regulatory or legislative developments, the attractiveness and location of properties, the financial condition of tenants, potential liability under environmental and other laws, as well as natural disasters and other factors beyond a manager’s control.

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