U.S. life and annuity issuers have reacted to worries about office building occupancy rates by shifting assets into apartment buildings and other forms of multifamily housing.
The result is that multifamily housing accounts for the biggest share of the insurers' exposure to commercial real estate.
The insurers issuers had about $234 billion of their $5.1 trillion in cash and invested assets, or 4.4% of the total, invested in multifamily housing, mortgage loans issued to multifamily housing owners and other assets related to multifamily housing, according to a Moody's Ratings analysis based on S&P Global Market Intelligence data.
That compares with about $180 billion in assets, or 3.4% of their assets, invested in assets related to office buildings.
What it means: Part of the filling in your clients' life and annuity burritos is made up of investments in real estate. Any big problems with the real estate investments could give the burritos an off taste.
Worries about office building investments are now getting most of the attention and are the focus of the Moody's report. But life and annuity issuers now have more exposure to apartment buildings.
Any big, long-lasting market shifts that hurt apartment building prices, such as new restrictions on home-sharing or new restrictions on real estate investment trusts' ability to invest in residential real estate, could cause problems for life and annuity issuers.
The office nightmare: The COVID-19 pandemic caused many companies to have employees work from home for at least part of the week. Remote work arrangements have persisted at many employers even though memories of the pandemic are fading.
Lower occupancy rates have cut the resale prices of some buildings in cities like Chicago by as much as 40% from their peak.
