UK Insurers are increasingly buying into so-called covered bonds as Solvency II approaches, the Financial Times reports.

The bonds , which are typically backed by a high-quality pool of mortgages plus a guarantee from the issuing bank, are attractive to insurers because they are triple-A rated, yet are higher-yielding than typical triple-A-rated securities.

Insurers are expected to have to hold up to 150% more capital against single-A-rated instruments under Solvency II, the paper said, making triple-A-rated securities more attractive.

According to the FT, the increased interest from both insurers and banks is creating a renaissance for covered bonds, especially in the UK.

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