U.S. Insurance Industry’s Exposure to Securities Lending and Repurchase Agreements as of Year-End 2017
by Jennifer Johnson of the NAIC
"For U.S. insurers, securities lending represents a potentially low-risk asset management strategy. As they are short-term transactions, U.S. insurers engage in securities lending activity to achieve short-term financing and to obtain additional yield income. That is, insurers not only earn a modest income on fees charged to counterparties (i.e. other financial institutions that may also be referred to as “borrowers”) on securities lent, but they also earn income on the cash or securities received in exchange for the loaned securities (known as “reinvested collateral”). Historically, securities lending has not been a significant investment for U.S. insurers, with reinvested collateral at less than 1% of U.S. insurers’ total cash and invested assets."