Insurers Schedule BA Exposure Continues to Rise

by Michele Wong and Jean-Baptiste Carelus of the NAIC

"While the U.S. insurance industry’s exposure to long-term investments reported on Schedule BA has increased significantly over the last decade, it should not represent a material risk in a stressed environment because of the relatively small concentration at 6.1% of total cash and invested assets. In addition, exposure represented 28% of total capital and surplus. However, U.S. insurers with significant exposure to Schedule BA assets as a percentage of total and capital surplus should be monitored closely, given the high illiquidity of these investments. At year-end 2020, less than 1% of U.S. insurance companies had exposure to Schedule BA assets exceeding 100% of their total capital and surplus."

"While life insurance companies continued to account for the majority of the industry’s Schedule BA exposure at over 50%, P/C companies’ share increased to 44% as of year-end 2020 from 41% at year-end 2019. The share increase is due to an almost 22% increase in BACV exposure at P/C companies, much higher than the total industry’s exposure increase of 13%. Health and title companies’ share of industry exposure remained relatively stable YOY."

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Insurers Schedule BA Exposure Continues to Rise

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