U.S. P&C and life insurers have actively invested in excess bonds issued by peers and related companies. While there was no other solution in 2018, the total amount of new investments decreased compared to the previous year, which corresponded to the issuance model. With new issues outpacing maturities and withdrawals, U.S. life ratings had a surplus of US$33.79 billion in bonds on their books as of December 31, 2018, up from US$32.27 billion last year. The rate of increase slowed from 2017, when the volume of emissions reached at least a peak of more than $7.38 billion over ten years. While the ratio of excess bonds to policyholders` capital to the surpluses of non-life and non-life insurers has fallen to at least an 18-year low (1.60%), it is rising in the life insurance sector. The rate of 8.45% at the end of 2018 led to an increase of 28 basis points compared to the previous year, at a level well above the pre-financial crisis average. Life insurers accelerate excess bond issuance The deal called for the creation of the Harborwalk Funding Trust, a company that in some scenarios would have to buy some excess bonds of the Massachusetts Mutual Life Insurance Co. S&P Global Ratings said the pre-capitalized fiat securities that will be issued by the trust should create a conditional source of capital, given that the obligation to buy excess bonds would apply at any time, regardless of MassMutual`s financial situation or market developments. S&P Global Market Intelligence calculates a weighted average rate of 5.69% on fixed income bonds issued in 2018, 115 basis points higher than in 2017.
In total, as of December 31, 2018, U.S. life insurers had invested US$12.09 billion in non-member excess bonds. This represents an increase of $11.36 billion on the same day in 2017, and is the highest level of investment in this asset class in the 13 years for which data is available. And while guV insurers` issuance volume declined in 2018, their investments in unpeded excess bonds also peaked at least 13 years, from $777.8 million year-on-year to $937.4 million. Given that the Federal Reserve has in other words expressed its intention to remain on the sidelines for now, given that these are possible increases in the federal funds rate, conditions for issuing other excess bonds could remain favorable. . . .