US life and annuity insurance companies 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 a recent report by AM Best.
US life and annuity insurers now hold more than $522 billion in commercial mortgage loans, which is up significantly from $382 billion in 2015. The report also said the 2019 figure represents an 8% increase year-over-year.
Although favorable GDP growth, low unemployment and rising retails sales during 2019 had boded well for the holdings, more recent trends in commercial properties show developments may lead to further percentage declines in the holdings, the report said. In particular, the report noted that hotel and motel properties, which make up 4% of the life and annuity insurer's commercial mortgage loan investments, are expected to come under pressure until the global economy begins to emerge from the COVID-19 pandemic.
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Max Mitchell
Max Mitchell is ALM's Regional Managing Editor for The Legal Intelligencer, New Jersey Law Journal, Delaware Business Court Insider and Delaware Law Weekly. Follow him on Twitter @MMitchellTLI. His email is [email protected].
