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US insurance industry reports $7.5tn in cash and invested assets: NAIC

25th May 2021 - Author: Katie Baker

According to a National Association of Insurance Commissioners (NAIC), the US insurance industry reported a total of $7.5 trillion in total cash and invested assets at the end of last year, showing an increase of 7.7% compared to 2019.

The NAIC report also noted that cash and invested assets have grown steadily on an absolute dollar basis since 2011, with BACV increasing over 40% during the 10-year period.

The US insurance industry’s composition of assets has been relatively stable over time, with bonds continuing to be the largest component, representing 62.6% of total cash and invested assets at year-end 2020.

Common stock investments were reported as the second largest holding for the industry at 13.2% of total cash and invested assets, followed by mortgages at 8.3% and Schedule BA assets at 6.1%.

While exposure to less liquid assets (such as mortgages and Schedule BA assets) continued to increase as measured in absolute dollar terms, insurers enhanced their balance sheet liquidity, whereby cash and short-term investments increased 27% in 2020 in response to the uncertain operating environment resulting from the COVID-19 pandemic.

The report saw that credit quality of the US insurance industry’s bond portfolio deteriorated as of the end of 2020, with bonds designated NAIC 1 and NAIC 2 declining one percentage point to 93.9% of total bond exposure and a small shift in exposure toward the lower end of the higher quality spectrum.

Bond investment portfolios experienced credit quality deterioration following record levels of negative rating actions at nationally recognised statistical rating organisations (NRSROs) in 2020 following the impact of the COVID-19 pandemic on the credit markets.

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