{"id":22472,"date":"2024-09-13T19:14:59","date_gmt":"2024-09-13T19:14:59","guid":{"rendered":"https:\/\/www.thinkadvisor.com\/2024\/09\/13\/fed-puts-life-and-annuity-real-estate-under-magnifying-glass\/"},"modified":"2024-09-13T19:14:59","modified_gmt":"2024-09-13T19:14:59","slug":"fed-puts-life-and-annuity-real-estate-under-magnifying-glass","status":"publish","type":"post","link":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/2024\/09\/13\/fed-puts-life-and-annuity-real-estate-under-magnifying-glass\/","title":{"rendered":"Fed Puts Life and Annuity Real Estate Under Magnifying Glass"},"content":{"rendered":"
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Analysis details:<\/strong> The Chicago Fed economists conducted the analysis to address concerns that life insurers\u2019 large investments in office mortgages and in commercial mortgage-backed securities backed by offices could perform so poorly that the office slump might kill life insurers, cause a run on life insurers\u2019 assets, and start or amplify financial system problems.<\/p>\n

The economists wave off objections that life insurers are set up in such a way that the customers can\u2019t run in and get their assets out.<\/p>\n

\u201cRuns in the insurance sector have occurred in the past,\u201d the economists write.<\/p>\n

In 1991, they report, policyholders ran on Executive Life, a company with large, poorly performing holdings in bonds issued by companies with low crediting ratings, and asked for policy withdrawals and annuity surrenders equal to about 30% of the value of the insurer\u2019s life and annuity product liabilities.<\/p>\n

The economists included all U.S. life insurers in their analysis but looked in depth only at a few dozen insurers that they believe could have more than $250 million in commercial real estate losses in a crisis.<\/p>\n

They look at a crisis roughly comparable to the current slump, not a more severe slump.<\/p>\n

In that scenario, losses in New York could cost life insurers about $2 billion, and losses in Los Angeles could cost them about $1.5 billion.<\/p>\n

Losses could range from $500 million to $1 billion in San Francisco in Washington.<\/p>\n

A majority of the insurers that would have losses would have losses amounting to less than 1% of their capital, and few are set up in such a way that they could lose more than 20% of their product liabilities and annuity assets to runs, the economists found.<\/p>\n

Insurers could be especially vulnerable to runs if they have a significant share of certain kinds of institutional arrangements, such as funding-agreement-backed securities, or if they have a large share of annuities that can be surrendered without a penalty, the economists write.<\/p>\n

Credit: Shutterstock<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

Analysis details: The Chicago Fed economists conducted the analysis to address concerns that life insurers\u2019 large investments in office mortgages and in commercial mortgage-backed securities backed by offices could perform so poorly that the office...<\/p>\n","protected":false},"author":1,"featured_media":22473,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[],"tags":[1],"jetpack_featured_media_url":"https:\/\/blog.lifeinsurance-orleans.ca\/wp-content\/uploads\/2024\/09\/fed-puts-life-and-annuity-real-estate-under-magnifying-glass.jpg","_links":{"self":[{"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/posts\/22472"}],"collection":[{"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/comments?post=22472"}],"version-history":[{"count":0,"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/posts\/22472\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/media\/22473"}],"wp:attachment":[{"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/media?parent=22472"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/categories?post=22472"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/tags?post=22472"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}