As the winner of Structured debt manager of the year, Wellington is in a great position to offer perspective on a rapidly changing market that is of increasing importance to insurers. Alyssa Irving, the firm's fixed income portfolio manager and chair on its financial reserves management team, sat down to talk about how Wellington sees the market.

By Pete Carvill, Insurance Asset Risk

Insurance Asset Risk (IAR): There has been a trend in recent years where structured debt was growing in importance to insurers? Has this been maintained? Where do you see this trend going?

Alyssa Irving (AI): Structured debt remains a strategic allocation for many insurers across life, P&C, and health sectors. As of year-end 2024, US insurers collectively held almost $9tn in invested assets, with structured securities – including CLOs, RMBS, and CMBS – among the faster-growing segments, reflecting steady demand for securitized exposures. The appeal is supported by attractive relative value versus corporates, improved liquidity in key securitized markets, and potentially favourable regulatory capital treatment relative to income that can help insurers efficiently match their liabilities. Given these structural advantages, we expect insurers' securitized allocations to continue to expand.

IAR: Which themes around the world have had the biggest impact on your strategy this year?

AI: This year, our strategy has been shaped by global macro desynchronization, tariff/policy uncertainty, and interest rate volatility. In securitized markets, this has translated into a high-quality bias, while placing particular emphasis on sponsor risk, which we believe is underappreciated in the market. Beyond this, we've leaned into structural themes such as AI-driven transformation, and digital infrastructure, all of which are generating financing needs increasingly met through securitization. Regulatory shifts – including NAIC's CLO modelling and Principles-Based Bond Definition guidance, as well as EU reforms to simplify securitization due diligence and enhance STS frameworks – are also influencing securitized sector allocations and tranche selection.

IAR: We've seen a lot of debate and talk about interest rates, plus we seem to be in a continual cost-of-living crisis. How are these issues impacting your thinking right now?

AI: The combination of interest rate volatility and the ongoing cost-of-living crisis has highlighted the importance of resilience and selectivity in portfolio construction. For insurers, that has often meant leaning into securitized markets where structural features such as amortization, subordination, and floating-rate coupons can provide both income and downside protection. At the same time, we are closely monitoring consumer credit bifurcation – especially in autos and personal loans – as well as pockets of the private credit market that we believe warrant greater scrutiny. Together, these dynamics appear to be shaping a more disciplined, risk-aware approach to securitized allocations.

IAR: What is your outlook for the next year? What issues do you see as being important and how would you respond to them?

AI: Looking ahead, we anticipate continued macro and regulatory uncertainty, with NAIC reforms, EU securitization updates, and heightened idiosyncratic risks due to increased M&A activity shaping insurer behaviour. The NAIC's modernization effort and the American Academy of Actuaries' CLO modelling work suggest a more dynamic investment landscape. For insurers, we see opportunities in areas of the structured markets, investment-grade private placement markets, and commercial real estate debt that align with long-term liabilities and capital efficiency. Within this, the growth of asset-based finance and the merging of public and private markets are creating both opportunities and valuation pressures. Staying nimble and selective may help insurers capture value while managing risk.