Insurers Supported Bond Market Resilience During COVID
Dec 8, 2025
Insurers Supported Bond Market Resilience During COVID
Dec 8, 2025
Life insurers played an important role during the COVID-19 pandemic, paying a record $90.4 billion in death benefits in 2020 and issuing 105 million life insurance policies from 2020 through 2022.
These figures demonstrate the importance of the industry’s products, particularly in challenging times. But a forthcoming study in the Review of Financial Studies by Maureen O’Hara (Cornell), Andreas Rapp (Federal Reserve), and Xing Zhou (Southern Methodist University) finds that insurers also played a critical role as investors during the early days of COVID.
Life insurance products are long-term in nature, often held for 50 years or more. To ensure that claims on these products can be paid when needed, they are matched with long-term investments such as corporate bonds. In fact, life insurers are the largest institutional corporate bond investor in the U.S., holding $3.7 trillion in corporate bonds in 2025 Q2.
During the first days of COVID-19, from March 6 through March 19, 2020, bond markets were in crisis. Though not a direct measure of bond market volatility, the CBOE Volatility Index (VIX) reached its highest recorded level on March 16, surpassing the previous record set in 2008. Additionally, during those two weeks investors were aggressively selling bonds in order to build up cash holdings, driving up yields on Moody’s seasoned Aaa-rated corporate bonds from 2.36% to 4.12%. Investor selling rapidly overwhelmed dealer capacity.
O’Hara et al. found that insurers during this critical period, unlike other investors, were net buyers of corporate bonds, rather than net sellers. By March 20, when the Federal Reserve launched facilities specifically dedicated to corporate credit, insurers had purchased $2.5 billion more in corporate bonds than they sold.
Because they are long-term, buy-and-hold, value investors, life insurers in particular were well-positioned to both ride out market fluctuations, and to take advantage of opportunities. Increasing bond holdings when others were moving away from bonds helped stabilize the market.
Andrew Melnyk
Andrew Melnyk is Vice President, Research and Chief Economist at the American Council of Life Insurers (ACLI). He holds a doctorate in economics and is a Certified Business Economist. His functions at ACLI include authoring white papers; managing the production of statistical publications; and managing ACLI’s Research Department. Prior to joining ACLI in 2005, he held positions in academia, government, and the private sector, both in the U.S. and abroad.
