Corporate bonds with credit ratings of BB or less. They pay a higher yield than investment grade bonds because issuers have a higher perceived risk of default. Such bonds involve market risk that could force investors, including insurers, to sell the bonds when their value is low. Most states place limits on insurers' investments in these bonds. In general, because property/casualty insurers can be called upon to provide huge sums of money immediately after a disaster, their investments must be liquid. Less than 2 percent are in real estate and a similarly small percentage are in junk bonds.

"Junk Bonds" In Context

"The bonds yield 5.13 percent, the data show. Ford’s upgrade was anticipated to raise the price of other junk bonds as investors seek other large, actively traded speculative-grade debt. Ford’s $25 billion in the Bank of America Merrill Lynch ..."