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Insurance Treasury Bill Conundrum – Japan Hesitates

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Insurance Treasury Bill Analysis – Largest Foreign Holder Now Dumping

The Insurance Treasury Bill Conundrum applies to all of the insurance markets.  I had written a few articles on how China was (still is) affecting insurance company investments.   If you wish to explore how much an insurance carrier invests in very safe investments (T-Bills) you have to look no further than the 10-K for any insurance carrier.

10-Ks are required by the Security and Exchange Commission (SEC) on a yearly basis.   I like the way that Hartford presents their 10-K.   If you would like to see one, download the PDF here.  

The results when searching for Treasury in the PDF totals 35 appearances in Hartford’s 10-K.  Insurance carriers look to safely invest large sums of money.  If carriers cannot safely invest their funds, where do they turn? The internal rate of return has to come from somewhere.

Japan Sells Off A Large Amount of Treasury Bills

If you wish to see how much each foreign nation has invested in US Treasuries –

Statistic: Major foreign holders of United States treasury securities as of July 2022 (in billion U.S. dollars) | Statista

I brought up the large amount of Treasury Investments by Japan in 2019.  As you can see in the above chart from Statista, Japan is our largest foreign investor.

I came across this article in the Wall Street Journal that pointed out Japan’s lackluster interest in buying US Treasuries.  The insurance Treasury Bill conundrum comes from, as I have pointed out in the China sell-off articles.

The chart below shows what I would call dumping securities –

chart workers comp treasury bill conundrum Japanese investments
(c) WSJ and Japanese Finance Ministry

I will not go into the “whys” of the current investment outlook from Japan other than to look at the far right of the chart.  Wow! The very well-written WSJ article covers the situation very nicely – think Yen vs. Dollar.

Tieing It All Together

When the insurance treasury bill conundrum happens and T-Bills become less desired by major foreign investors – Japan and China- the safe investment market will dry up leaving insurance carriers having to either invest in risker investments or having to generate an internal rate of return (reserves and premiums).

Insurance carriers have always been very conservative investors.  I provided a link to The Hartford’s 10-K as an example of the type of investments carriers seek out.   Could this just be a bump in the road – possibly, but look at the charts again.

 

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James J Moore - Workers Comp Expert

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James founded a Workers’ Compensation consulting firm, J&L Risk Management Consultants, Inc. in 1996. J&L’s mission is to reduce our clients’ Workers Compensation premiums by using time-tested techniques. J&L’s claims, premium, reserve and Experience Mod reviews have saved employers over $9.8 million in earned premiums over the last three years. J&L has saved numerous companies from bankruptcy proceedings as a result of insurance overpayments.

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