Global convertible bond strategies
A two point conversion
Over the past 12-18 months we have seen a growing interest in convertible bonds from insurance companies, an asset class which has traditionally been underrepresented. Some of this interest is from firms who de-risked their portfolios through the financial crisis and are now exploring ways to re-risk with lower volatility, and some from insurers looking for a capital-efficient way to gain access to risk assets.
In this paper, we review the key reasons why convertibles should be considered and discuss their merits in an insurance context. In particular, we explore why we believe access to the global market is critical by looking at relative valuations, and analyze how convertibles are treated from a risk-based capital perspective under NAIC rules.
The views and opinions contained herein are those of Schroders’ investment teams and/or Economics Group, and do not necessarily represent Schroder Investment Management North America Inc.’s house views. These views are subject to change. This information is intended to be for information purposes only and it is not intended as promotional material in any respect.