Insurers must carefully navigate risks and opportunities of SIG assets, say Hymans Robertson and L&G

The recent Solvency UK reforms are reshaping investment opportunities for life insurers, particularly in sub-investment grade (SIG) private debt. With the removal of barriers such as the BBB cliff-edge, insurers can now explore higher-yielding assets while maintaining a prudent and strategic approach to risk. 

In partnership with L&G, Hymans Robertson explores this changing landscape and the risks and opportunities it holds for UK insurers in a new whitepaper. 

Co-authors Nicola Kenyon and Alex Wharton comment on the new paper – Sub-investment grade private debt investment opportunities for life insurers under Solvency UK reform.

Nicola Kenyon, Partner, Insurance & Financial Services, Hymans Robertson, says:

“The market is now open for change. The reforms mean that firms can benefit from any additional risk-adjusted spread available on SIG assets, particularly for UK productive assets and investments that support the net-zero transition. Insurers have been taking credit risk onto their balance sheet for a long time, and many firms have good policies, procedures, skillsets and systems in place to manage risks from IG credit. 

“Insurers are well-placed to prudently invest in SIG assets, provided they evolve their approach to account for the nuances in SIG compared to IG credit.”

Alex Wharton, Managing Director, Partnerships & Insurance, Asset Management, Legal & General, says:  

“The recent Solvency UK reforms represent a significant opportunity for life insurers to enhance capital efficiency by incorporating BB-rated private credit into their Matching Adjustment portfolios. Insurers can strategically access these assets to improve risk-adjusted returns, diversification, and strengthen long term liability management.

“Beyond the potential financial benefits, these changes align with a broader push toward sustainable investment. BB-rated assets offer insurers a pathway to support impact led initiatives, such as renewable energy and social infrastructure, driving long-term economic growth. With greater flexibility under the new framework, insurers are well-positioned to explore new investment frontiers."