US life and annuity insurance companies have seen a dramaticincrease in commercial mortgage loan holdings over the past fiveyears, 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 incommercial mortgage loans, which is up significantly from $382billion in 2015. The report also said the 2019 figure represents an8% increase year-over-year.

Although favorable GDP growth, low unemployment and risingretails sales during 2019 had boded well for the holdings, morerecent trends in commercial properties show developments may leadto further percentage declines in the holdings, the report said. Inparticular, the report noted that hotel and motel properties, whichmake up 4% of the life and annuity insurer's commercial mortgageloan investments, are expected to come under pressure until theglobal economy begins to emerge from the COVID-19 pandemic.