Life Insurance Made Simple

Photo courtesy of www.whatisthetrend.net

Since commercial mortgages have weakened, insurance companies have taken the role of lenders. In fact, in last year’s second quarter, $15.7 billion was underwritten by the industry of life insurance in commercial mortgages that are new. This is the largest volume recorded by the American Council of Life Insurers, and basically doubles the mortgage volume that has been underwritten in last year’s first quarter.

This opportunity for insurance companies came about because of the absence of activity coming from investment institutions and banks. Many banks on Wall Street were hit hard by the weak economy, which is the main reason why these major mortgage lenders have become quiet.

The reason most life insurance companies were able to continue business operations despite the weak economy is because they are normally conservative companies. Insurers normally favour high-quality borrowers and those who have trophy properties, and keep the volume of their loans on the balance sheets. On the other hand, investment banks group a majority of their issue bonds and mortgages against the loans. This in turn allows the investment banks to transfer the risks off the balance sheets and allow them to continue to underwrite, even those that are considered riskier loans.

Normally, investment banks would dwarf life insurers. However, with the economy’s weak, unstable state, it seems that life insurers have upped their game one level. With the lack of activity from investment banks, life insurers have less competition. This allows life insurance companies to offer a number of great loans for those properties that meet the companies’ guidelines.