Insurers want a bigger slice of the bank risk transfer boom

Esteban Duarte / Bloomberg08-26

Insurers are aiming for a bigger slice of the market for significant risk transfers this year, as banks step up their use of the hedging instruments.(Aug 26): Insurers are aiming for a bigger slice of...

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They predict that growth will be strongest in transactions linked to corporate loans and asset-based finance, followed by deals tied to residential mortgages, the survey found. \nBanks use SRTs to insure loans against default, typically obtaining protection for between 5% and 15% of the portfolio value. The instrument also allows lenders to boost their solvency ratios or free up capital. \nMost transactions are funded, with investors putting up cash as collateral to cover potential losses in return for a coupon. Insurers tend to participate in unfunded SRTs, by issuing a type of credit guarantee. The Bank of England (BOE) is concerned that this type of deal may leave banks exposed to greater risk at times of stress because it relies on insurers being able to honour their guarantees.\nThe IACPM survey found that the number of unfunded credit protections increased to 96 in 2025, from 78 the previous year. Insurers protected approximately 4.7 billion (US$5.5 billion) of SRT tranches last year.\n\nAt the end of 2025, insurers had provided protection on 10.9 billion of outstanding SRT tranches executed since 2019, linked to risk on 366 billion in loans.\nDeals tied to lending to large corporates and small and medium-sized enterprises represented 58% of new business last year, followed by residential mortgages, which accounted for 20% of newly-protected portfolios. \nLending in the European Union accounts for 63% of the reference portfolios hedged via unfunded credit protections. followed by the US with 17% and other European nations, including the UK, with 12%, according to the survey. \nBanks that recently marketed or completed unfunded credit protections include BNP Paribas SA, Mitsubishi UFJ Financial Group Inc and Austria's Erste Group Bank AG, which turned to insurers for an SRT to free up capital for its acquisition of Santander Bank Polska. Lenders including Banco Santander SA and UniCredit SpA regularly place some of their SRTs with insurance firms.\nUploaded by Liza Shireen Koshy","kind":"highlight","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":false,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"isVideo":false,"video":null,"symbols":[],"gpt_button":0,"need_auth":false,"need_login_tip":false,"code":"91000000","status":"200"},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"isLaohu8Offline":false,"tenantId":"TBGLOBAL","deviceId":"web-server-community-laohu8-v3","version":"4.48.0","shortVersion":"4.48.0","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2662459647","isCrawlerRequest":true}