There’s been plenty of speculation about insurance companies crowding out commercial mortgage bond investors this year. Volatility in the capital markets in the first quarter, combined with new and impending regulations, have made it difficult for firms that underwrite loans for sale to securitization conduits to compete with so-called portfolio lenders.

Now there’s evidence that insurance companies were busy refinancing loans out of CMBS conduits even earlier, in the second half of last year.

A survey of 25 insurance companies conducted jointly by the Commercial Real Estate Finance Council and Trepp indicates that participants allocated 11.08% of their invested assets to commercial mortgages at the end of 2015, for a combined $204 billion in exposure. That represents an increase of 40 basis points over the end of 2014. 

Holdings ranged from a high of 18.08% to a low of 1.62%; the low value of 1.62% was reported by one of two firms that participated in the survey for the first time.

Survey participants added a combined $44.7 billion of commercial mortgages in 2015, an increase of more than $7 billion over the prior year.  Approximately 94% of the new originations were fixed-rate loans and roughly 90% were categorized in the survey as “new business/financing,” which CREFC and Trepp said could include refinancing of maturing loans previously held by other investors – including mortgage bond conduits.

In recent years, securitization has accounted for between 20% and 25% of all commercial real estate lending, or roughly $100 billion a year. But issuance of commercial mortgage bonds has fallen sharply this year, even though there is a wall of maturing CMBS loans that need to be refinanced. Deutsche Bank estimates that the CMBS market’s share of new commercial mortgage originations dropped to 10% in the first quarter.

Insurance companies aren’t the only competition; many banks also make commercial mortgages that they keep on their balance sheets.  Federal Reserve data shows bank holdings of commercial real estate loans have increased by over $150 billion in the past year. Deutsche Bank estimates that bank’s collective market share rose to 52% in the first quarter.

That suggests that the collective market share of insurance companies in the first quarter was 38%.

The CREFC/Trepp survey indicates that originations of commercial mortgages by insurers were evenly distributed across property types in 2015; loans backed by office properties accounted for 26% of total dollar volume and loans backed by multifamily properties accounted for 24%. Retail and industrial each represented about 20% of the originations.

The weighted average loan-to-value ratio for new originations by insurers fell slightly in 2015, to 59%; while the average debt service coverage ratio rose slightly, to 2.24x.

Both of those figures are far superior to those of loans originated by CMBS lenders.  The average loan-to-value ratio in CMBS conduits rated by Moody’s Investors Service had a loan-to-value ratio, as measured by the rating agency, of 118.3%.

No surprise, then, that commercial mortgages held by insurance companies continue to experience lower losses and perform better than CMBS and the commercial bank sectors. The total realized net losses in the general accounts and subsidiary entities of survey participants were 0.01% as of the end of December 2015, a slight drop 0.04% a year earlier.

In contrast, CMBS and commercial banks experienced losses of 0.81% and 0.05%, respectively, as of year-end 2015, according to CREFC and Trepp.

Total loan delinquencies (30 days or greater) recorded by insurance survey participants did increase during the second-half of 2015, up from 0.02% from year-end 2014. Most of these delinquencies were from “problem loans" (90+ days delinquent), which increased to 0.17% from 0.03% a year earlier.

Survey participants contributed data from their general accounts for the second half of 2015, as well as from subsidiaries in order to fully capture performance of any sub-performing or non-performing loans in these entities.

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