Insurers have become an increasingly important part of the SRT market over the last five years, helping issuers diversify their investor bases and cutting costs, especially in the mezzanine part of the capital structure.

But insurers face regulatory obstacles in their investments. The typical insurance SRT deal is unfunded, and comes not from the asset side of an insurer’s balance sheet, but as a liability — an insurance contract which pays out against credit losses.

Those who favour this approach say that the risk fits better on the liability side because it is a largely illiquid credit, fairly short dated, and subject to pre-payment.