Thu 19 Nov 2009
Life Insurers: Commercial Real Estate Exposure
Posted by under Industry Financials , Insurers and the Economy , EconomyNo Comments
What a difference a year (and a half) can make. In April 2008, ratings agency Fitch published a report indicating that while the outlook for commercial real estate (CRE) related investments had deteriorated, it did not anticipate a major impact on U.S. life insurers’ capital or ratings in 2008. Now, Fitch has published a revised report projecting that U.S. life insurers may incur CRE-related investment losses in the range of $18.5 billion to $22.6 billion through 2011. Why the reversal in fortunes? Fitch reports that commercial real estate fundamentals are softening as rents are declining and vacancies increasing in response to the broader economic downturn. It expects all commercial property types to experience declines in income and value in this stressed environment. On a positive note, Fitch believes the industry’s loss exposure to CRE-related assets is manageable in the context of the industry’s strong capital position and earnings (industry capital […]
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