Life insurance companies, which were among those still financing commercial real estate when banks started stepping back, might not be in danger of overexposure to the sector.

Insurance companies aren't at risk right now because of a combination of “stable investment portfolios comprised of high-quality, diversified exposures, conservative underwriting, strong liquidity and effective asset-liability management,” Fitch Ratings said Tuesday.

The majority of U.S. life insurers’ CRE exposure is commercial mortgages, and of those loans, 30% are to multifamily, 20% to office and 16% to industrial, Fitch said.

At the end of 2022, mortgage loans accounted for 13% of U.S. life insurers’ portfolios, which was above historic levels of 8% to 12% but stable compared to year-end 2021, Fitch said.

Fitch said it expects any losses sustained by these lenders to remain within their ratings sensitivities — the parameters that Fitch uses to determine at what point ratings should change. That is even taking into account that Fitch expects a mild recession early next year.

The ratings agency does expect losses.

“Life insurer debt service coverage ratios are starting to deteriorate and material unrealized losses are emerging, portending higher losses, but are expected to remain within ratings sensitivities,” Fitch said.

Even on office loans, losses are still hovering around historical averages, Fitch said. Further pain is expected to be limited: While the potential for defaults will rise, Fitch expects most near-term office loans to be extended.

Fitch is anticipating also that life insurance companies aren’t likely to be forced to sell off any assets they own at bargain-basement prices, noting that most insurers who own real estate are long-term owners.