This article was produced by Invesco as part of their valued industry partnership with Insurance Investor.
This marketing communication is for professional investors only.
CLOs: Opportunities for insurers
Collateralised Loan Obligations (CLOs) are structured finance vehicles that pool broadly syndicated senior secured corporate loans, issued in multiple tranches with varying risk and payment priority. For European insurers seeking stable, long-term income to support liabilities, investment-grade CLO tranches – especially AAA-rated – offer compelling benefits including enhanced yield, risk management, and portfolio diversification.
The global CLO market has grown to $1.4 trillion, with AAA CLO tranches gaining significant demand due to their attractive yields and strong credit profiles. Over the past five years, AAA CLOs have delivered yields notably higher than similarly rated corporate bonds, with volatility two to three times lower than broader investment-grade markets. They have maintained zero principal losses historically, rapid recovery during market downturns, and lower correlation to other investment-grade assets, making them ideal for capital preservation and incremental income.
CLOs’ structural features – such as high subordination, over-collateralisation, and interest coverage – along with their floating rate nature and diversified loan pools, contribute to resilient cash flows and reduced interest rate sensitivity. The cash flow “waterfall” prioritises payments to senior tranches, benefitting AAA investors by absorbing losses in junior and equity tranches first. This structure, combined with coverage tests and reinvestment restrictions, limits impairments and de-risks senior notes.
Regulatory reforms under Solvency II are enhancing CLOs’ appeal for European insurers by significantly reducing capital charges on senior CLO tranches, particularly AAA notes, by up to 70–80%. This aligns their capital treatment more closely with BBB-rated corporate bonds, improving capital efficiency and encouraging greater CLO allocations. However, mezzanine and junior tranches remain capital-intensive, requiring careful portfolio construction.
For insurers seeking cost-efficient, diversified exposure without the complexity of direct CLO investments, CLO ETFs present an attractive alternative. These ETFs offer daily liquidity, full transparency, and access to a broad pool of CLOs, managed by experienced teams with expertise across the US and European CLO markets.
In summary, AAA CLOs provide European insurers with a practical solution to increase yield, manage risk, and diversify portfolios, supported by strong structural risk mitigation and improved regulatory capital treatment. CLO ETFs further simplify access, making this asset class increasingly accessible for insurance investors aiming for stable, long-term income.
Access the full article and discover how CLOs are opening up unique investment opportunities for UK and European insurers.
Investment Risks
The value of investments and any income will fluctuate (this may partly be the result of exchange rate fluctuations) and investors may not get back the full amount invested.
Important information
This marketing communication is exclusively for use by professional investors in Continental Europe as defined below, and Professional Clients in Dubai, Ireland and the UK. For Professional Clients, Exempt Investors, Accredited Investors or Non-Natural Qualified Investors in the Middle East. It is not intended for and should not be distributed to the public.
For the distribution of this communication
- Continental Europe is defined as Austria, Belgium, Denmark, Finland, France, Germany, Italy, Liechtenstein, Luxembourg, The Netherlands, Norway, Portugal, Spain, Sweden and Switzerland
- The Middle East is defined as Bahrain, Qatar, Oman Kuwait, Saudi Arabia and United Arab Emirates.
Data as at 31 March 2026, unless otherwise stated. By accepting this material, you consent to communicate with us in English, unless you inform us otherwise.
This is marketing material and not financial advice. It is not intended as a recommendation to buy or sell any particular asset class, security or strategy. Regulatory requirements that require impartiality of investment/investment strategy recommendations are therefore not applicable nor are any prohibitions to trade before publication. Views and opinions are based on current market conditions and are subject to change.
Issued by: Invesco Management S.A., President Building, 37A Avenue JF Kennedy, L-1855 Luxembourg, regulated by the Commission de Surveillance du Secteur Financier, Luxembourg; Invesco Asset Management, (Schweiz) AG, Talacker 34, 8001 Zurich, Switzerland; Invesco Asset Management Limited, Perpetual Park, Perpetual Park Drive, Henley-on-Thames, Oxfordshire RG9 1HH, UK. Authorised and regulated by the Financial Conduct Authority; Invesco Asset Management Limited, Index Tower Level 6 - Unit 616, P.O. Box 506599, Al Mustaqbal Street, DIFC, Dubai, United Arab Emirates. Regulated by the Dubai Financial Services Authority.
EMEA5386726/2026
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