Insurers Navigate Cost of Capital Challenges Amid Market Uncertainty
Insurers are facing challenges in managing their cost of capital due to market uncertainties, including the Iran conflict and private credit exposures. Despite these challenges, insurers have maintained healthy profits and solid solvency levels. The industry is witnessing a shift towards using lower-cost solvency eligible debt, such as Restricted Tier 1 (RT1) products, to manage capital more efficiently. This shift is driven by the need to deliver strong returns on equity and manage the expectations of shareholders, creditors, and regulators. The RT1 market is growing, with significant issuance observed in recent years, indicating a trend towards more efficient capital management. 
