IDEAS home Printed from
   My bibliography  Save this article

The Determinants and Potential Effects of Life Insurer Mortgage Backed Securities Exposure


  • Andre P. Liebenberg
  • Lee Colquitt
  • Harris Hollans


Our study examines two aspects of life insurers’ exposure to the troubled residential mortgage backed securities (RMBS) market. First, we develop and estimate a model that explains cross-sectional variation in RMBS exposure in terms of firm characteristics. We find that firms least likely to invest in RMBS tend to be small and to have high separate accounts ownership and large investments in common stocks and cash and short-term investments. Among firms that do invest in RMBS, publicly traded firms and those with a relatively high proportion of separate accounts assets have lower levels of RMBS exposure. We then estimate the effect of a change in RMBS risk ratings on insurer surplus via the asset valuation reserve. We find that, while there is a measurable exposure to RMBS, this exposure and its resulting effects on the asset valuation reserve are unlikely to have a major impact on most insurers’ balance sheets. However, a dramatic downgrade of aggregate (residential plus commercial) mortgage backed securities could result in a decrease in surplus of almost 10% for the largest U.S. life insurers.

Suggested Citation

  • Andre P. Liebenberg & Lee Colquitt & Harris Hollans, 2010. "The Determinants and Potential Effects of Life Insurer Mortgage Backed Securities Exposure," Journal of Insurance Issues, Western Risk and Insurance Association, vol. 33(1), pages 1-30.
  • Handle: RePEc:wri:journl:v:33:y:2010:i:1:p:1-30

    Download full text from publisher

    File URL:
    Download Restriction: no


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Sojung Carol Park & Jean Lemaire & Xiaoying Xie, 2016. "The Opaqueness of Structured Bonds: Evidence from the U.S. Insurance Industry," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 41(4), pages 650-676, October.

    More about this item


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wri:journl:v:33:y:2010:i:1:p:1-30. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (James Barrese). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.