Life Cos. Step Up Commercial Mortgages

NEW YORK CITY—Although their exposure to CMBS has been essentially flat over the past year,  life insurers have stepped up their involvement in commercial mortgage origination. Fitch Ratings reported last week that the search for yield led to a record $77 billion of new mortgage originations in 2013, an amount that’s expected to increase in calendar 2014.

More life companies have increased their allocation to commercial mortgage loans as an alternative to lower-yielding bonds, says Fitch. These include large mutual companies whose general account mortgage allocations are in the 12% to 15% range. In its annual survey of Fitch-rated life insurance entities, the ratings agency found that life companies generally have increased their commercial mortgage allocations from an average of 11% in 2011 to 11.5% last year, with most ranging from 8% to 12% of general account investment.