...Manageable Exposure to Energy Sector: As a result of low oil and gas prices and structural changes in the energy market, Fitch Ratings expects U.S. life insurers to realize $3 billion¡ $4 billion of corporate bond losses tied to the energy sector in 2016 under our base case scenario. This loss estimate includes impairments based on an 11% high-yield default rate assumption and trading losses tied to portfolio repositioning, which equates to approximately 5% of industry earnings and 1% of industry statutory capital. Fitch views losses of this magnitude as manageable, particularly in light of Fitch's expectation of below-average corporate bond defaults in most corporate sectors in 2016. However, a key risk is energy contagion affecting other asset classes. Average Energy Exposure: The U.S. life insurance industry's exposure to the energy sector within its corporate bond portfolio was 11.6% at year-end 2014, which equates to approximately 5% of total cash and invested assets. The industry's...
