Life Insurers' Commercial Mortgages Struggled in 2022
Rising interest rates hit life insurers’ commercial mortgage investments hard in 2022, according to mortgage database company Trepp.
The firm’s LifeComps Total Return Index, a performance measure for life insurers’ commercial mortgage investments, fell to 449.154 in the fourth quarter of 2022, from 499.84 a year earlier.
The value of life insurers’ commercial mortgages fell 14.3%.
Researchers have been compiling the LifeComps index since 1997. The 2022 performance is the worst the LifeComps team has ever reported, Trepp said.
What It Means
Life insurers note that most of their products are designed to stay in place for many years, and that they intend to hold most of their mortgages and mortgage-backed securities to maturity. But poor mortgage portfolio performance could hurt life insurers that have sudden increases in cash needs.
Life Insurers’ Portfolios
Because of regulatory requirements, U.S. life insurers tend to invest heavily in bonds, mortgage-backed securities and other long-term, fixed-income assets.
