Life Cos. Swap Liquidity for Yield

Fitch Ratings says life insurers’ investments in commercial mortgages grew to $360 billion in 2015.

NEW YORK CITY—Life insurers stepped up their investments in commercial mortgages last year and are expected to continue doing so, Fitch Ratings said Thursday. That’s the case even as mortgage underwriting standards generally have declined, a trend seemingly at odds with life companies’ conservative approach. The ratings agency notes that competition among life companies has been growing for mortgages, due to an increasing pool of insurers in this asset class that are willing to trade liquidity for yield.

Investment in mortgages grew 7.7% in 2015 to $360 billion for life insurers in the Fitch-rated universe, representing an increase over the prior-year growth rate of 5.8%. Mortgage allocations increased to 12.4% of invested assets for life insurers in the Fitch universe from 11.6% the prior year.