Investments in Mortgages Support Life Insurers’ Guarantees

Feb 6, 2020

[Life Insurance 101 Series: This series features IMPACT posts that detail the breadth of the industry’s reach and benefits provided to consumers.]

Life insurers are a bedrock of the American economy, providing employment for American workers and investment capital for U.S. businesses. But did you know that life insurers also make hundreds of billions of dollars of mortgage loans?

Sure enough. Life insurers are a major source of direct financing through mortgage lending for the nation’s commercial, residential, and agricultural markets. Total mortgage lending by life insurers has grown from $2 billion in 1917 to $565 billion in 2018, the most current data available.

Mortgage loans are stable, long-term investments whose duration and return support the guarantees that life insurers provide to our customers.

In 2018, life insurers held $515 billion in commercial mortgages, $26 billion in residential mortgages, and $24 billion in agricultural mortgages. Mortgages made up 12 percent of total life insurer general account assets, the highest percentage in over two decades. In addition, the mortgages life insurers hold are of the highest quality, with over 99 percent in good standing.

Life insurers have consistently been among the top three financial institution sources for commercial mortgage lending, which includes mortgages on apartments, office buildings, hotels and motels, retail stores, shopping centers, hospitals and medical centers. Residential mortgages, including mortgages on single family properties (one to four dwelling units), have grown from $5 billion in 2008 to $26 billion in 2018, an average annual growth rate of 17 percent. Mortgages held by life insurers on agricultural properties have held steady, increasing at an average annual rate of 3 percent over the past decade.

Life insurers also support the U.S. mortgage lending market through investments in mortgage-backed securities (MBS), including pass-through securities, mortgage-backed bonds, mortgage pay-through securities, and collateralized mortgage obligations (CMOs). Life insurers primarily hold commercial mortgage-backed securities (CMBS) and residential mortgage-backed securities (RMBS). Collectively, life insurers in 2018 held $576 billion in CMBS and RMBS, up from $353 billion in 2008.

Khari Cook

Khari Cook is Senior Analyst, Research at the American Council of Life Insurers (ACLI). He is primarily responsible for data analysis of life insurers’ quarterly and annual statutory filings, along with company product line and investment survey data.