E6: The hottest topic in credit: insurance structuring with 9fin's Owen Sanderson
Apr 10, 2025
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Owen Sanderson, ABS Editor at 9fin, dives deep into the evolving world of credit markets and insurance structuring. He discusses how firms can tailor assets to fit insurance capital, revealing insights on emerging trends in private credit. Owen explores the risks associated with financial manufacturing, the dynamics between corporate credit negotiations, and the impact of regulatory changes in Europe. Expect intriguing market predictions and a fresh perspective on the relationship between insurers and asset managers!
Insurance capital is significantly reshaping credit markets, allowing asset managers to diversify portfolios and enhance origination volumes.
The influx of insurance capital raises concerns about potential conflicts of interest and market risks, necessitating careful regulatory scrutiny.
Deep dives
The Rise of Insurance Capital in Credit Markets
Insurance capital is becoming a significant driving force in the credit markets, particularly due to the evolving dynamics brought about by big asset managers acquiring insurers. This integration allows asset managers to access permanent capital, which is essential for originating diverse types of private assets. The podcast highlights the historical context of this dynamic, emphasizing firms like Apollo and Athene that pioneered this relationship, enabling insurance companies to diversify their portfolios from low-yield corporate bonds to higher-return private credit assets. The substantial influx of insurance capital has sparked unprecedented growth in origination volumes, showcasing how asset managers can leverage this relationship to enhance their credit offerings.
Navigating Pockets of Opportunity in the Market
Across various segments of credit, insurance capital is exploring numerous avenues, particularly in asset-based finance and fund finance. Insurance firms are increasingly investing in sectors like fund finance, with reports indicating that some companies significantly boosted their origination volumes after acquiring partnerships with insurance companies. A notable example is KKR's collaboration with Global Atlantic, which not only doubled their origination volume but also underlines the broader trend of insurance capital navigating and reshaping diverse credit markets. This widespread integration points to insurance capital's role as a potent force shaping the future landscape of credit investment.
Opportunities and Risks in an Expanding Market
While the influx of insurance capital into credit markets presents numerous opportunities, it also raises concerns regarding potential conflicts of interest and the overall quality of investment products. As alternative asset managers conduct business across different funds, the intertwining interests may lead to complexities in managing these relationships and ensuring clients' best interests are upheld. Additionally, the podcast points out that the current buoyant market conditions may mask underlying risks that could become apparent during economic downturns. Careful scrutiny and regulatory oversight will be essential to mitigate these risks as the lines between asset management and insurance become increasingly blurred.
The Evolution of Public and Private Market Dynamics
The podcast discusses the ongoing evolution of public and private market dynamics, particularly how large firms may be creating a market environment that favors their dominance. As major institutions accumulate significant capital and leverage their pricing power, concerns arise that smaller funds could become marginalized, potentially impacting market competitiveness. The conversation speculated on the possibility of a future where private credit markets become more liquid, drawing parallels to past transitions where previously private assets gained institutional trading capabilities. This shifting landscape raises questions about how increased regulatory scrutiny and changes in securities laws may further influence the relationship between public and private markets.
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Welcome back to our latest installment of The Credit Clubhouse, as always I am your host, Todd Anderson, Head of Content & Programming at DealCatalyst.
Joining me today is someone who needs no introduction to the DealCatalyst community, Owen Sanderson, ABS Editor at 9fin. Thanks for joining me today Owen.
Key topics covered:
- The biggest topic in credit: insurance structuring
- How can firms manufacture assets that suit insurance capital?
- The big alternatives shops and their captive insurers
- Selling assets straight into the captive insurers
- How much risk is being added to the market?
- Navigating the difficult regulatory environment in Europe
- Private credit, asset-based portfolios, and infrastructure
- Market predictions
- And more…
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