Insurance Companies and the Growth of Corporate Loans' Securitization

Fulvia Fringuellotti and Joao Santos

No 975, Staff Reports from Federal Reserve Bank of New York

Abstract: Insurance companies nonupled their CLO investments in the post-crisis period. This growth has far outpaced that of loans and bonds and is characterized by a strong preference for mezzanine tranches over triple-A tranches. Conditional on capital charges, insurance companies invest more in bonds and CLO tranches with higher yields but prefer the latter because these carry higher yields. Preferences increased following the 2010 regulatory reform, resulting in them holding 44 percent of outstanding investmentgrade rated mezzanine tranches. In the process, insurance companies contributed positively to the rise of corporate loan securitization and availability of bank credit, particularly to riskier borrowers.

Keywords: insurance companies; CLOs; regulatory arbitrage; corporate loans; securitization (search for similar items in EconPapers)
JEL-codes: G11 G20 G22 (search for similar items in EconPapers)
Pages: 100
Date: 2021-08-01
New Economics Papers: this item is included in nep-cwa, nep-ias and nep-isf
Note: Revised March 2025.
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Working Paper: Insurance Companies and the Growth of Corporate Loan Securitization (2021)
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