UK insurers recoupon interest rate swaps in bid to enhance yield

Unwinding in-the-money swaps to release cash for investments and collateral management

UK insurers are renegotiating their in-the-money interest rate swaps to release cash to invest in higher-yielding assets and reduce the cost of servicing collateral, according to market participants.

Insurers holding fixed receiver swaps entered into when interest rates were high have seen the mark-to-market value of these positions rocket in recent years as rates have plummeted. At the same time, falling rates have reduced the yield insurers can achieve on the asset portfolio.

Shazia Azim, a