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Old 04-18-2018, 07:52 PM
Dr T Non-Fan Dr T Non-Fan is offline
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Default Defaults: are insurers at risk?

http://money.cnn.com/2018/04/10/inve...dys/index.html

In my days as an actuarial exam taker, there were Course 220 and Course 6, all about investments and other related topics.
I recall something about downgrades and defaults screwing up insurers. (Cash flow issues and investment losses balancing insurance products that assumed a positive rate of return.)

So, anyone in the Investment area concerned about this surge in retail defaults? No company names needed (and best not to divulge them).
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Old 04-18-2018, 08:00 PM
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I don't see why we would see an issue.

Default risk is still pretty small.
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Old 04-18-2018, 08:24 PM
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Default risk is still pretty small.
Wasn't that what they said about MBSs? Until it wasn't small any more.
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Old 04-18-2018, 08:30 PM
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What were their credit ratings before defaulting?

If below investment grade, then that's not too surprising



Default rates on corporate bonds had been very low since 2010... I've been waiting for the upswing
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Old 04-18-2018, 08:32 PM
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fwiw, this is the sector that's more worrisome:

http://www.naic.org/capital_markets_archive/180411.htm
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Old 04-18-2018, 08:36 PM
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Wasn't that what they said about MBSs? Until it wasn't small any more.
That was a much more complicated problem.

Also, the numbers involved where much bigger and hit many more entities (hence the contagion risk problem).

This is only really hitting brick and mortar retailers (due to increasing competition from online only retailers and changing consumer spending patterns)There have not been any other blips in other industries for there to be a concern. This would only be a concern if an insurer had massively concentrated their assets into the retail only sector (this would never happen as they would breach risk concentration limits), thus having a significant effect in their risk-adjusted cashflows. This would then off course impact the balance sheet. But like I said, this is not a credible scenario for any insurer that I know off.
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Old 04-26-2018, 07:32 PM
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Originally Posted by The_Polymath View Post
That was a much more complicated problem.

Also, the numbers involved where much bigger and hit many more entities (hence the contagion risk problem).

This is only really hitting brick and mortar retailers (due to increasing competition from online only retailers and changing consumer spending patterns)There have not been any other blips in other industries for there to be a concern. This would only be a concern if an insurer had massively concentrated their assets into the retail only sector (this would never happen as they would breach risk concentration limits), thus having a significant effect in their risk-adjusted cashflows. This would then off course impact the balance sheet. But like I said, this is not a credible scenario for any insurer that I know off.


Agreed, even indirect risk to the sector is generally monitored pretty closely.
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