Brandan Holmes from the Financial Institutions team examines the growing trend among European insurers to cut their underwriting and investment exposure to the fossil fuels sector, especially thermal coal. Lower fossil fuel exposure is credit positive for insurers as it makes them less likely to face climate change-related liabilities, while reducing the risk of their assets losing value as the transition to a low-carbon economy progresses.
Jody Shenn and Pedro Sancholuz Ruda from the Structured Finance team discuss how technologies like alternative data, machine learning, blockchains and document digitization can help to improve the accuracy and efficiency of asset origination or underwriting, as well as transaction services. That said, nearly all are untested through a credit cycle and come with potential legal and compliance risks.
Yehudah Forster and Lima Ekram of the Residential Mortgage Backed Securities team discuss how weaker variations of non-QM underwriting increase default risk for US RMBS, though lender controls, technology, and post-crisis rules and best practices can mitigate some risk.