North American Life Insurers Can Withstand Real Estate Declines, S&P Says

North American life insurers have enough capital to offset the impact of a potential decline in commercial real estate, Standard & Poor’s said.

“The credit ratings for most life insurers were not impacted by our recent stress test,” S&P analyst Deep Banerjee said today in a statement. “The majority of life insurers have adequate capitalization to withstand asset losses arising in a stressed commercial real estate environment.”

Corporate bonds, mortgage-backed securities and commercial mortgage loans make up about 80 percent of assets in U.S. life insurers’ investment portfolios, according to the S&P report. Life insurers buy corporate debt and MBS to fund obligations to policyholders that may take decades to mature. MetLife Inc. and Prudential Financial Inc. are the biggest U.S. life insurers.

Delinquencies for U.S. bonds backed by mortgages on office buildings, shopping centers and other commercial property rose to a record in the second quarter, the Mortgage Bankers Association said in a Sept. 2 report. Payments at least 30 days late rose to 8.22 percent from 6.83 percent in the first quarter, according to the Washington-based trade group.

To contact the reporter on this story: Inyoung Hwang in New York at ihwang7@bloomberg.net.

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