U.S. life and annuity issuers have seen a dramatic increase in commercial mortgage loan holdings over the past five years, leading to an increased exposure to low-quality credit, according to AM Best.
The issuers commercial mortgage loan holdings have increased to $522 billion, from $382 billion in 2015.
In 2019, low unemployment and rising retails sales made investments in commercial properties look good.
The COVID-19 pandemic has changed things.
Hotel and motel properties make up 4% of the life and annuity insurer’s commercial mortgage loan investments, and they are expected to come under pressure until the global economy begins to emerge from the COVID-19 pandemic, according to AM Best.
“However, [life and health] insurers’ low exposure to hotels will help minimize the impact,” the firm says.
Retail and office property also are experiencing big drops in revenue. That could hurt their valuations, and the performance of commercial mortgage-backed securities, the firm says
— Read Life Insurers Ended 2019 With $4.6 Trillion, on ThinkAdvisor.