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Sep18
Subprime Mortgages: Foreclosures Not Affecting Insurance Companies
Andrew Smyth September 18, 2007
Know More: Consumers 2.0, Consumers

The news of the subprime mortgage debacle has many individuals and companies worried about the near future.  However, it appears that the insurance industry is going to come out largely unscathed.  According to a white paper from the Insurance Information Institute (III) insurers are not deeply invested in lenders.

"The vast majority of U.S. insurers have little or no exposure to the volatility in the subprime mortgage market because of the nature of their investments.Subprime_Mortgages_Foreclosures.jpg 

The I.I.I. report noted that about 53 percent of life/health insurers’ invested assets were in the highest-rated class of bonds and 19 percent were in the next highest-rated class as of year-end 2006.  The comparable percentages for the invested assets of property/casualty insurers in the bond market were 67 percent and 4 percent.

Insurers’ portfolios are still vulnerable to broad market sell-offs caused by fears originating in the subprime sector, such as occurred during July and August 2007.  Nevertheless, direct losses will be very limited and insurers’ tendency to hold securities on a long-term basis implies the effects of short-term market volatility will likely be minimal."

Doesn't this news just make you love big insurers even more? 

4 Comments/Trackbacks




I work for CurrentForeclosures.com, a foreclosures site and have seen a huge increase in the number of foreclosures in the past 9 months. I believe it is a combination of not only sub-prime and ARM mortgages, but also the high number of people who have gotten loans with interest rates at an all time low... in addition to the rapid depreciation in some areas and the difficulty some are experiencing in selling their homes.

Posted by: TSmith | September 18, 2007 10:40 AM | Permalink to Comment

I bet if you back to the savings and loan debacle you would find most insurance companies not heavily stacked there either. They are by nature conservative in their investing, which is good for the consumer they serve. Insurance must be there when it is needed and that requires alot of patience in how/where money is spent.

Posted by: Arizona Insurance Company, Broker, agent | September 18, 2007 8:40 PM | Permalink to Comment

I work for CurrentForeclosures.com, a foreclosures site and have seen a huge increase in the number of foreclosures in the past 9 months. I believe it is a combination of not only sub-prime and ARM mortgages, but also the high number of people who have gotten loans with interest rates at an all time low... in addition to the rapid depreciation in some areas and the difficulty some are experiencing in selling their homes.

Posted by: TSmith | September 19, 2007 8:45 AM | Permalink to Comment

Insurance companies were wise not to get involved with lenders, many of whom have been guilty of slipshod business practices (if not outright fraud) in the whole sub-prime mess. If anything, it leads me to view the big insurance juggernauts as even more focused exclusively on the bottom line... which, of course, they are.
Jerry
www.leads4insurance.com

Posted by: Jerry | October 19, 2007 9:43 AM | Permalink to Comment

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