Insurers Clamor for Securitized Debt as Annuity Sales Surge (1)

Insurance companies are snapping up asset-backed bonds to fund future payouts on their annuity products which are seeing record demand — a trend that is expected to continue, according to Morgan Stanley.

Securitized products grew to 25% of insurers’ bond portfolios in 2023 compared to 22% in 2017, adding roughly $365 billion in exposure to the segment, the bank said in a January 31 research note. Insurers putting together annuity products are drawn to longer-dated asset-backeds as their duration is a good match for annuities, and also for their attractive yield profiles.

The higher-for-longer interest rate backdrop has led ...