Insurers Eye Bigger Slice of Bank Risk Transfer Market Amid Growth

Insurers are eyeing a bigger share of significant risk transfer (SRT) deals this year, as banks increasingly turn to hedging instruments. A survey by the International Association of Credit Portfolio Managers found that global insurers and reinsurers expect to participate in about 50% more SRTs than in 2025.

Transactions linked to corporate loans and asset-based finance are expected to see the strongest growth, followed closely by deals tied to residential mortgages. Most SRTs are funded, with investors providing cash as collateral for a coupon, but insurers prefer unfunded SRTs, which involve issuing credit guarantees.

The Bank of England (BOE) has expressed concerns that unfunded SRTs may leave banks vulnerable to greater risk during times of stress. Despite this, the number of unfunded credit protections increased from 78 in 2024 to 96 in 2025, with insurers protecting approximately €4.7 billion ($5.5 billion) of SRT tranches last year.

The reference portfolios hedged via unfunded credit protections are largely concentrated in the European Union (63%), followed by the US (17%) and other European nations (12%). Notably, banks such as BNP Paribas SA, Mitsubishi UFJ Financial Group Inc, and Erste Group Bank AG have recently turned to insurers for SRTs to free up capital.