REPORT | CMBS Faces Risk of ‘Disruptive Shocks’ Regulators Told

CMBS Faces Risk of ‘Disruptive Shocks’ Regulators Told

Commercial mortgage-backed securities have more risk than last year as landlords need to repay maturing debt and vacancies remain elevated, according to an analysis prepared for insurance regulators.

“Downside risk for CMBS relative to last year’s assumptions has clearly increased,” according to a report for the National Association of Insurance Commissioners posted on the group’s website. The market is “proving itself subject to highly disruptive shocks” and has less time to deal with the coming wave of loan maturities, consultants and NAIC staff said in the report

Regulators are scrutinizing bonds held by insurers as they evaluate whether the companies will have enough funds for policyholder obligations in an economic slump. The report, dated Oct. 16, was sent to Kevin Fry, chairman of the NAIC’s task force for valuation of securities. State regulators can demand insurers hold more funds against assets deemed risky.

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Copy of the report below…

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