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2023-05-12

Insurance - No reason for investors to panic

A decade of extremely low rates has created distortions across the financial world and it could take a long time for these to unwind. That attrition problem goes far beyond the banks.

The issue at stake is captured in some charts buried in the Federal Reserve’s recently released financial stability report. 

These show that insurance groups held about $2.25tn of assets deemed to be risky and/or illiquid, including commercial real estate or corporate loans, at the end of 2021 (apparently the latest available data). 

In gross terms, that is almost double the level they held in 2008, and represents about a third of their assets.

The mighty, quasi-state entity that is the FHLB which is propping up many parts of US finance today rather than the regional banks. 

Once again, I am not suggesting that this is a reason for panic

Gillian Tett FT 11 May 2023

https://www.ft.com/content/1aa41d97-f8a7-46d5-be71-6ec0a0cc208f?emailId=07888ccb-2152-4c01-b0e6-aac70a1c5989&segmentId=7d033110-c776-45bf-e9f2-7c3a03d2dd26


Federal Reserve’s financial stability report

https://www.federalreserve.gov/publications/files/financial-stability-report-20230508.pdf


What Is the Federal Home Loan Bank System (FHLB)?

https://www.investopedia.com/terms/f/fhlb.asp


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