Collateralized loan obligations (CLOs) have become a larger portion of insurance company portfolios in the past decade, but the growing number of CLO downgrades may concern some insurers. Fortunately, the majority of CLO securities insurers hold are rated AAA or AA, a segment that has proven resilient during market dislocations since the asset class was introduced in 1994.
However, the full impact of the COVID-19 pandemic has yet to be determined. Insurers may be wise to continue the ongoing monitoring, stress testing and credit analysis of their CLO holdings to help them safely navigate today’s challenging market conditions.
Conning and affiliate Octagon Credit Investors have developed a Viewpoint – “Amid CLO Downgrades, Monitoring, Stress Testing, Robust Credit Analysis Key for Insurers” – that discusses the issues in depth.