Convertibles: A Flexible Asset for Insurance Portfolios

Convertibles: A Flexible Asset for Insurance Portfolios

Rising market interest rates have piqued curiosity in convertible securities, but many insurers do not fully understand how convertibles work or what they can add to a portfolio. The fact that they can be converted into the issuer’s equity speaks to their value proposition: possible equity upside with a bond’s downside protection.

An experienced hand can be valuable in analyzing and managing convertible exposures, but the asset class may offer insurers several potential benefits, including:
  • Capital efficiency – Convertibles’ potential equity upside is accompanied with a bond-like treatment for risk-based capital charges
  • Diversification – convertibles have a low correlation to bonds and issuance tends to come from less mature firms, which may offer greater sector diversity
  • Risk Management – Among the possible benefits are how convertibles can help insurers fine-tune portfolio equity risk exposures.

Please fill out the form to download the Viewpoint and learn more about the potential portfolio benefits and risks of adding an exposure to convertible bonds.

Download The Viewpoint
Please fill out the form to download the Viewpoint and learn more about the potential portfolio benefits and risks of adding an exposure to convertible bonds.