Standard & Poor's (S&P) notes that reinsurers have increased their exposure to equities in the past year, but the credit rating agency believes the amount of risk they have assumed is still moderate and within acceptable levels.

In a report published on Aug. 25, Standard & Poor's credit analyst Anvar Gabidullin notes that low yields have forced reinsurers to look at ways to bolster their investment income; this may involve taking on more credit or liquidity risk, lengthening asset durations, or increasing the amount of money they have allocated to equities.

S&P says it has observed a 30% reduction in average net investment yields over the past four years for the 24 companies that make up its global reinsurance peer group. It describes this reduction in yield as "collateral damage" resulting from the accommodative monetary policies that central banks have adopted since the global financial crisis in 2008.

"Over the past 12-18 months, we've seen an increase in exposure to equities within reinsurers' portfolios," says Gabidullin. "However, the increase is moderate and the overall exposure is generally still within reinsurers' risk tolerances."