Asset Allocation Implications of Life Insurance RBC Changes

By Lara Devieux, Vladimir Kovalerchik, Michael Ragusa of MetLife Investment Management

MetLife explains new NAIC RBC factors that will impact insurer portfolios. Expect a similar change in AM Best BCAR factors?

"Taken as a whole, U.S. life insurance industry capital charges will increase as a result of the more granular RBC bond factors, largely owing to significant increases in capital charges for single-A and mid-to-low BBB securities. The biggest “winners” were the at the highest quality (AAA and AA+) and some high yield ratings buckets (BB+, B+ and CCC+), which received capital relief relative to the prior regime."

"There could be asset allocation implications as a result of the new RBC bond and REE factors: all else equal, compared to the prior RBC regime, high-quality structured finance, loans and real estate equity are more capital efficient, while private fixed income remains attractive given spread premiums to publics."

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Asset Allocation Implications of Life Insurance RBC Changes

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