Life Insurers' Real Estate Assets Look Good

Owners of empty office buildings could eventually fail, stop making payments and add drama to big U.S. life and annuity issuers’ quarterly financial reports. At this point, though, there’s not much real estate-related drama.

Weakness in the commercial real estate sector is “a big risk across the financial markets,” Anika Getubig, an S&P director, said Wednesday during an S&P Global Ratings update on the fourth quarter of 2023.

Life and annuity issuers look as if they’re managing that risk well, she said.

At Morgan Stanley, a team of analysts led by Bob Jian Huang came to the same conclusion in their latest quarterly life and annuity sector review.

“CRE exposure within life insurers investments have held up better than expected throughout the year,” the analysts wrote in their assessment of the fourth quarter.

What it means: The issuers backing clients’ life insurance policies and annuity contracts continue to perform well.

The backdrop: Life insurers have invested about 10% of their $5 trillion in assets in commercial mortgages, with some of those assets in office building mortgages and securities backed by them.