Life Insurers Play Vital Investing Role in US Economy: Chamber

Life insurers invest in a wide array of sectors in the U.S. economy, they can stabilize markets, and they can help fund infrastructure projects, according to a new paper prepared by the U.S. Chamber of Commerce, with help from a data analyst from Ernst & Young.

The paper, “The Role of Insurance Investments in the U.S. Economy,” champions the role of life insurers as investors, and it talks about the positive long-term improvements life insurers’ investments can produce.

Life insurers’ investments in education projects “could build about 1,000 elementary schools every year” through municipal bond purchases, and life insurers could build a road from Washington to Los Angeles every year with their investments in the municipal bonds used to fund transportation projects, according to the paper.

(Related: Thirsty Life Insurers See Bond Yields Rise to Highest Level in Five Years)

The Chamber introduced the paper Tuesday, at an event in Washington.

The paper was presented by Martin Spit, a partner at EY-Parthenon and Bill Hulse, director of the Center for Capital Markets Competitiveness at the Chamber.

The Data

U.S. insurers had $5.8 trillion in investment assets as of December 2017, according to the paper.

In 2017, insurers accounted for:

• 21% of the corporate bond market.
• 20% of the municipal bond market.
• 12% of nongovernment funding for U.S. farm loans.
• $120 billion in business investment.

Insurers also held about $468 billion in commercial and multifamily debt, or 15% of all such debt, totaling $468 billion, according to the paper.

U.S. insurers “invest in bonds that trade less frequently, and their long-term investment horizon stands in marked contrast to the shorter investment holding period observed in public equity markets,” according to the paper.”

The Speakers

Insurers were represented at the Chamber event by the American Council of Life Insurers and by MetLife Inc., which is a Chamber member.

Insurance industry representatives said insurers have acted as a safety net and supported positive growth.

National Association of Insurance Commissioners CEO Mike Consedine said during a panel discussion that providing incentives for insurance investment is an important topic, as is acting on investments for the “societal good.”

Consedine said, however, that one person’s good might not be another’s.

Tom Sullivan, another panelist, objected to “happy talk” about infrastructure investments.

Sullivan is a Federal Reserve official who oversees insurance regulatory standards for insurers with a savings and loan holding company  structure.

“Assets need to back liabilities,” Sullivan said.

“I don’t think we want to get into the business of picking one [credit investment] over another,” Sullivan said.

— Read Prudential’s Real Estate Finance Arm Describes Its Lending Targets, on ThinkAdvisor.

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