U.S. annuity gross sales ought to be sturdy in 2024, and the issuers will in all probability make investments a major share of the premiums in non-public credit score preparations, in accordance with Jamie Tucker, a senior director at Fitch Rankings.
“We count on allocation to personal credit score to proceed to extend, partly pushed by financial institution lending retrenchment,” Tucker mentioned Friday throughout a Fitch briefing on its credit score outlook for the North American life sector.
What it means: Extra of the belongings inside shoppers’ annuities could also be tied to swimming pools of automobile loans, bank card accounts and small-business loans, and fewer to the notes and bonds that present financing for giant, well-known firms, partly as a result of banks are dealing with turbulence.
Personal credit score: The non-public credit score market handles financing offered by mechanisms apart from financial institution loans and publicly traded bonds.
The dimensions of the U.S. non-public credit score credit score market elevated to $2.3 trillion in the beginning of 2023, from $875 billion in 2020, in accordance with Morgan Stanley.
State insurance coverage capital counting guidelines strongly encourage U.S.-based life and annuity issuers to put money into high-grade company bonds, however plummeting bond yields pushed insurers to bump up allocations to different belongings after the 2007-2009 Nice Recession.
Personal fairness companies have acquired some life and annuity issuers and related with others by giant reinsurance preparations. These companies have promoted elevated insurer use of personal credit score and different belongings that pay comparatively excessive charges as a result of they’re tougher to promote than publicly traded shares or publicly traded bonds.
