NEAM Insights

Tariff Regime Change In 2025, the U.S. unleashed the most sweeping tariff regime since Smoot-Hawley: minimum 10% reciprocal duties on nearly all imports, layered on metals tariffs, and revived Section 301 penalties on targeted goods under national security authority. China faced combined rates as high as 145% before a fragile truce reduced many categories down toward 30%, but new moves (such as threats of 100% tariffs to Chinese port fees and stricter rare-earth export controls) show that volatility is returning. Removal of the $800 de minimis threshold for low-value imports has dragged e-commerce and everyday goods into the tariff net, extending the policy’s reach to every U.S. household. With average U.S. rates near 18% (see Exhibit 1), tariffs have become a structural feature of U.S. economic policy. Read More

Introduction Fannie Mae (Federal National Mortgage Association) and Freddie Mac (Federal Home Loan Mortgage Corporation) are the cornerstones of the U.S. housing finance system. As Government-Sponsored Enterprises (GSEs), their primary function is to ensure liquidity, stability, and affordability in the secondary mortgage market by purchasing mortgages from lenders, pooling them, and issuing mortgage-backed securities (MBS) with a repayment guarantee. This process frees up lenders’ capital and enables them to extend more loans to homebuyers, contributing significantly to housing affordability and availability. Together, the GSEs guarantee $6.67 trillion of Single-Family mortgages, equivalent to ~52% of outstanding U.S. mortgage debt.1,2,3 Read More

EXECUTIVE SUMMARY This article examines the enterprise profile of U.S. workers’ compensation (WC) insurers and evaluates their investment performance relative to the broader U.S. property and casualty (P&C) industry. WC insurers tend to carry more invested assets than other P&C insurers and typically exhibit lower premium-to-surplus ratios, reflecting the longer-tailed nature of the WC business. They have adopted a more conservative investment approach, reflected by lower allocations to risk assets, which has resulted in net investment income (%) trailing that of the broader P&C industry over the past decade. Within fixed income portfolios, despite maintaining comparable average credit quality and longer duration relative to the P&C industry, the WC composite generated lower book yields. A focused assessment of sector allocations and duration/quality strategies may reveal opportunities to enhance fixed income portfolio performance. Notably, WC insurers that assumed greater investment risk, particularly larger firms, generally achieved higher book yields, suggesting that selective risk-taking may serve as a lever for improving investment outcomes. Read More

September Overview At its September meeting, the Fed lowered its benchmark rate range by 25 basis points to 4.00-4.25%. It marked the first move since December 2024. With the employment outlook weakening, Powell stated “the balance of risks has shifted.” Although inflation remains a concern and leaves their dual mandate “in tension,” the Fed, which has no “risk-free path,” believes that “downside risks to employment have risen,” lending support to the committee’s ultimate decision to reduce their benchmark rate range. The move was accompanied by the release of the most recent Summary of Economic Projections, which showed real GDP growing slightly from previous estimates, while unemployment projections remained level to slightly lower and core inflation estimates also tracked a slower course on the way to the Fed’s ultimate target of 2.0%. While policy is not on a “pre-set path,” and remains data dependent, median estimates from the SEP highlight further action, with estimates for the Fed’s benchmark rate showing another 50 basis points of easing by year end, followed by an additional 25 basis points in 2026 and again in 2027. Read More

Executive Summary In 2024, the U.S. health insurance industry’s net investment income (%) reached a decade-high of 4.16%, supported by a prolonged high-interest rate environment and increased contributions from cash and short-term investments. The fixed income book yield also continued its upward trajectory, reaching a decade-high following notable improvements during 2022 - 2023. Read More

August Overview With downside risks to employment and upside risks to inflation continuing to present themselves, the minutes from the July FOMC meeting showed that more participants saw tariff induced risks to inflation as a more pressing issue than those impacting the labor market at that time, stating, “a majority of participants judged the upside risk to inflation as the greater of these two risks.” Read More

Executive Summary In this article, we delve into the enterprise profile of U.S. medical professional liability (MPL) insurers and assess their investment performance relative to the broader U.S. property and casualty (P&C) industry. The MPL composite trailed the P&C industry in net investment income (%), partly due to its more conservative asset allocation. Within the fixed income portfolio, despite having similar average credit quality and duration relative to the broader P&C industry, the MPL composite’s book yield was lower, though the gap has narrowed recently. An in-depth comparative analysis of sector allocation and duration/quality strategy may point to opportunities to improve portfolio yields. MPL Insurers that assumed greater investment risk, particularly larger firms, tended to realize higher book yields, suggesting that selective risk-taking could serve as a lever for enhancing investment performance. Read More

Executive Summary Steep unrealized investment losses during the COVID-19 pandemic and the rapid rate increase in 2022 have led insurers and some regulators to refocus on stress and scenario testing. This article explores metrics for quantifying losses during periods of stress, suggesting that incorporating them into portfolio construction and rebalancing can lead to more informed investment recommendations that better align with insurers’ risk-adjusted return preferences. Read More

July Overview At the end of the month, the Fed held its benchmark rate range steady at 4.25% - 4.50%. Nine Fed Governors voted in favor of staying put, while two dissented in favor of a quarter point cut. Despite touting a low unemployment rate and “solid labor market conditions,” the Committee altered its view of the economy from “solid” to “moderating,” and reiterated that “uncertainty remains elevated.” Read More

Executive Summary In 2024, the U.S. life insurance industry’s net investment income increased by 25 bps, extending the upward trajectory observed in 2023. This growth was primarily supported by persistently elevated interest rates. Read More