Tag: asset credit risk

U.S. Insurers Report a 1% Increase in Commercial Mortgage-Backed Securities Holdings in 2024, Still 2% Below 2022 Peak

Mary Pat Campbell

Link: https://content.naic.org/sites/default/files/capital-markets-special-reports-cmbs-ye2024.pdf

Graphic:

Executive Summary:

  • The U.S. insurance industry’s exposure to agency and private-label commercial mortgage-backed
    securities (CMBS) totaled $287 billion at year-end 2024, a 1% year-over-year (YOY) increase.
  • Property/casualty (P/C) insurance companies were the primary driver of growth, with their agency
    CMBS exposure rising 22% to $36 billion.
  • Agency CMBS accounted for 28% of U.S. insurers’ total CMBS exposure at year-end 2024, reflecting
    a steady increase from 24% at year-end 2022.
  • The credit quality of the CMBS portfolio remained stable overall, with investments carrying an
    NAIC 1 designation or NAIC 2 designation totaling 97.6% of total exposure at year-end 2024.
  • Office property delinquency rates remain elevated at 9.6% as of July 2025, according to S&P Global
    Ratings (S&P Global) data.

Author(s): Michele Wong and Hankook Lee

Publication Date: 16 Oct 2025

Publication Site: NAIC, Capital Markets Special Report

Matching adjustment becomes a battleground in UK’s Solvency II consultation

Mary Pat Campbell

Link: https://www.insuranceerm.com/analysis/matching-adjustment-becomes-a-battleground-in-uks-solvency-ii-consultation.html

Excerpt:

Solvency II sets strict requirements over what kinds of liabilities and assets are eligible for the MA [matching adjustment], and the governance of them. In the UK’s Solvency II consultation, respondents have argued a looser regime would be good for insurers – and good for the country.

…..

Many of these suggestions have been previously floated in industry circles, some since even before Solvency II came into effect in 2016. But there are a growing number of experts calling for a much more dramatic rethink of the MA – and whether it should even exist.

Dean Buckner, a former regulator at the Bank of England who worked on the MA, and Kevin Dowd, professor of finance and economics at Durham University, have been at the forefront of arguing the MA creates “fake capital” and puts annuity payments at risk.

In their submission to the consultation, they write: “The MA allows firms to recognise some anticipated risky future profits as if they were certain, thereby allowing them to be distributed before being realised. If the risky future profits are not realised – bear in mind that they are called ‘risky’ for a reason – then the capital created by MA will vanish, and policyholders will be at risk.”

Author(s): Christopher Cundy

Publication Date: 23 February 2021

Publication Site: Insurance ERM