The Chicago-based company expects the loss range for sub-prime and so-called Alt-A residential mortgage collateral to represent about 13% of the insurers’ holdings and 3% of aggregate industry statutory capital. Alt-A mortgages are those that fall between prime and sub-prime.
Fitch also said it expects the industry to report between $2 billion and $3 billion in realized losses on a pretax basis for the fourth quarter of 2007. However, the rating company, “continues to view the U.S. life insurance industry as well-capitalized.”
“While we believe that the industry’s concentration in high-investment-grade securities will limit losses in this market, Fitch is concerned about the potential for further deterioration in the market and its impact on other sectors of the credit market,” the report stated.