Banking Crisis Brings Bonds Back in Vogue

Are Insurance Companies at Risk?

Are Insurance Companies at Risk?
It’s natural to wonder whether the banking crisis could spill over into other segments of the financial sector.

We’ve fielded questions from clients about insurance companies and annuity providers.

The short answer is that the banking crisis appears to be largely contained, and we’re not seeing signs that liquidity will become an issue beyond the initial small subset of specialized regional banks and some of their partners.

Insurance companies—because they are not structured like retail lenders—are less susceptible to the risks that we saw with SVB and its ilk (like a bank run by depositors). Even with tighter credit conditions and an economic slowdown, insurers are more insulated due to lower liquidity needs and a relatively favorable interest-rate backdrop now versus the past decade.

For their part, annuities are structurally different than insurers—but the takeaway is the same. The risk of default on your annuities is low, especially with highly rated insurance companies, and we are not seeing similar signs of cracks that could lead to collapse in this area.

It’s true that some insurance stocks have been dragged down a bit by sympathy selling, but not as much as bank stocks. And our active stock portfolios are underweight financials, which lowers your exposure to this recent event and the fallout.

As always, we are available to talk about what’s going on in banking and how market developments may affect your financial goals.

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