Life Insurance

Loan-To-Value Rises As Debt Service Coverage Weakens For US Life Insurers

Commercial mortgage loan delinquencies rose in 2021 but remain manageable

AM Best’s new special report finds U.S. life insurers’ mortgage holdings back at historical levels, though problem loans spike in pandemic. To access the full copy of this special report, please visit here.

OLDWICK, N.J.–(BUSINESS WIRE)–Mortgage loan holdings for the U.S. life insurance industry grew by 6.6% in 2021, to $639.8 billion, in line with the 10-year average, after depressed growth of 3.8% in 2020, according to a new AM Best report.

The COVID-19 pandemic shuttered businesses in 2020, leading to a decline in revenue at retail stores, the services sector and hotels and lodging, pressuring borrowers’ ability to pay their rent or mortgage loans. In its new Best’s Special Report, titled, “Loan-to-Value Rises, Debt Service Coverage Weakens for U.S. Life Insurers,” AM Best notes the impact of the pandemic still can be seen in the significant number of closed businesses, driving occupancy rates lower. Currently, the market is navigating through inflationary pressures and rising interest rates, which despite driving up yield, could dampen demand. These factors will push risk management and underwriting discipline to the forefront for insurers, who must screen their revenue and growth assumptions, as well as the debt servicing capabilities of potential borrowers to match appropriate risk tolerance levels.

Main takeaways from the report include:

  • Multi-family housing and apartments drove commercial loan market growth in 2021; apartments now account for more than a third of insurers’ mortgage loan holdings. “Insurers were already moving from office and retail properties over the last several years, but the pandemic and changing lifestyles exacerbated the shift in allocations,” said Michael Lynch, associate analyst, AM Best.
  • Valuation declines caused by the pandemic have led to higher loan-to-value (LTV) ratios of commercial mortgage loans; more than 10% of mortgages had LTVs higher than 70%, compared with 6.4% in 2019.
  • The book value of problem mortgage loans grew sharply during the COVID-19 pandemic, up 60% since 2019 to over $4 billion.
  • Residential mortgage holdings grew by nearly 40% in 2021. These loans now account for almost 7% of the industry’s mortgage loan portfolio, up from just 1.3% in 2012. “Residential mortgage loans is a key driver in the growth of problem mortgages,” said Jason Hopper, associate director, industry research and analytics, AM Best. “Although they represent a small percentage of insurers’ total mortgage holdings, they account for more than 60% of all problem loans.”
  • The volatile economic environment has pressured debt-service coverage (DSC) ratios; however, the industry remains well-positioned, as 50% of AM Best-rated life/annuity insurers still report a DSC ratio of 2x-3x.




AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in New York, London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit


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