Private commercial real estate debt offers unique characteristics that can make this asset class particularly interesting for insurance companies. Besides attractive economic features, real estate loans may also benefit from favourable regulatory capital charges.

There are many ways in which insurers invest into the real estate sector

 Real estate has been a popular asset class among insurance companies for a long time. Today, insurers can access real estate markets in various ways, ranging from traditional direct real estate investments to mortgage loans or real estate investment trusts (REITs). As outlined in Figure 1, real estate capital markets can broadly be categorised into four segments.

According to data published by the European Insurance and Occupational Pensions Authority (EIOPA), insurance companies in the European Economic Area (EEA) hold more than EUR 680 billion in real estate assets including both equity and debt investments (as of June 2019). This represents 8.4% of the industry’s total general account assets. For life insurance, the share is even higher with 10.7% of total assets, while non-life insurers have smaller allocations to real estate, averaging about 7.0% of total assets. Additionally, the type of real estate exposure varies significantly between life and non-life insurers. While both types of insurer invest mainly in private markets, life insurers tend to do so in the form of debt – such as commercial real estate (CRE) loans or residential mortgages – while non-life insurers prefer direct real estate investments. Gaining real estate exposure via public markets only plays a minor role. This is especially true for investments in mortgage-backed securities which have almost disappeared since the subprime mortgage crisis of 2007/2008. Since then most public real estate debt investments have been made in the form of bonds issued by REITs and other property companies.

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This information is subject to change at any time, based upon economic, market and other considerations and should not be construed as a recommendation. Past performance is not indicative of future returns. Forecasts are based on assumptions, estimates, opinions and hypothetical models that may prove to be incorrect.

DWS International GmbH as of 6/19/2020
CRC 076638 (06/2020)

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