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Fitch Eyes Life Insurer Mortgage Exposure

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U.S. life insurers have taken a wide variety of approaches to reporting their exposure to low-rated mortgages.

Analysts in the Chicago office of Fitch Ratings have reported that finding in a summary of results from an analysis of the 10 U.S. life insurers with the largest known exposure to “non-prime residential mortgage-backed securities.”

The ratio of low-rated residential MBS exposure to statutory capital ranges from 16% to 227% at the companies studied, the Fitch analysts report.

Some insurers have recorded “significant impairments” related to declines in residential MBS prices, but others have recorded only minimal impairments, the analysts write.

If the prices of low-rated residential mortgage-backed securities continue to stay low during the second half of the year, many insurers are likely to recognize material impairments on their residential MBS investments, the analysts predict.

The charges should not affect shareholder equity, but the charges would affect statutory capital levels, the analysts write.


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