Research summary

Insurers play key role in European credit markets

November 07, 2022

How important are insurance companies in European corporate bond markets and how is their role changing with central banks stepping away as buyers?
Insurers are key players in credit across regions, but especially in Europe and the U.K.
Three pie charts show the percentages of indexes held by insurers and by other investors. In the Bloomberg Euro Aggregate Corporate Bond Index, insurers own 52% and other investors own 48%. In the Bloomberg Sterling Corporate Bond Index, insurers own 56% and other investors own 44%. In the Bloomberg U.S. Corporate Bond Index, insurers own 23% and other investors own 77%.
How will high inflation, rising rates, and slowing economic growth affect insurers’ investment decisions and the credit markets?
Yields in European investment-grade credit have moved significantly higher
A line chart shows the yield to worst for the Bloomberg Sterling Corporate Bond Index, Bloomberg Euro Aggregate Corporate Bond Index, and Bloomberg U.S. Corporate Bond Index. All three lines show a gradual and uneven decline in yield to worst from January 31, 2012, through August 31, 2021, and then a sharp, uneven upturn to end at highs for all three indexes on June 30, 2022. A mountain chart shows negative yields for corporate bonds appearing at the beginning of 2016. From that point, the percentage of negative yields varied greatly from zero to almost 50%, but it returned to zero at the end of April 2022 and has remained there since then.
Why insurers’ investment behavior is important to bond investors
Active Fixed Income at Vanguard
The graphic shows that Vanguard’s active Fixed Income Group managed $227 billion in taxable bonds and $199 billion in municipal bonds as of September 30, 2022. The active management team includes more than 25 portfolio managers, more than 35 traders, more than 60 research analysts, and more than 130 dedicated team members.
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