Abstract
In this paper, we explore the climate risk exposure of U.S. life insurers’ commercial mortgage loan portfolios, focusing on sea level rise (SLR) and flood risks. Commercial mortgages are an important asset class of life insurers: Approximately 15% of the life insurance industry asset is held in commercial mortgages. Life insurers are also important institutional investors in the commercial real estate (CRE) market. They hold approximately 14% of the outstanding CRE mortgage loans and are the third-largest institutional lenders in the U.S. commercial mortgage market. Life insurers are exposed to both physical and transitional risks of climate change through their commercial mortgage investments: Physical damages to commercial properties may increase due to flooding or SLR, and devaluation of certain commercial properties as the economy transitions can also lead to financial losses for life insurers.
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