Many insurance investors have responded to the ongoing Covid-19 crisis by taking a defensive stance in hopes of protecting their capital. While this response is a natural one, we believe many would be better served by taking this opportunity to refine their portfolios. Improving diversification across geographies and sectors reduces the risk of credit rating downgrades for long-term investors and limits future strain on P&L and solvency capital requirements.
We believe current valuation levels and attractive risk-adjusted spreads provide a strong entry point for high-quality Asian US-dollar-denominated corporate bonds, as well as offering scope to increase local book yield.
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