Life Companies Target an Active 2026

Featured in Commercial Property Executive

By Mike Wood

Insurance company lenders have an appetite for commercial real estate lending and promise to be a stabilizing force for the years ahead.

It’s hard to believe that we are already counting down the days to Thanksgiving, with the December holiday season just around the corner. Another year almost in the books. The lending climate is closing the year at a turning point for the better, and we seem to be sustaining positive momentum into the year ahead. Treasury yields are holding at recent cycle lows, asset performance is consistently exceeding debt service requirements at a vast majority of properties in an improving rate climate, and the lending landscape is active and competitive across a spectrum of sources.

No lender group has been more active or consistent in the current cycle than the insurance companies, and they remain committed to their permanent debt programs, a good sign for the new year on the horizon. After meeting their 2025 allocation targets, life company lenders have already shifted to quoting loans for 2026, punctuating their ability to rate lock up to six months in advance of closing. This is a good time to focus on stabilizing assets for the future.

The climate for long-term debt is as good as it has been over the past three years—if not better—and that reality is holding steady. Life companies have been consistent through the volatility of the recent cycle but are becoming even more competitive as conditions improve across the lending universe. Tighter spreads. Improving rates. Stable debt taking uncertainty off the table after a long period of volatility is becoming a comforting reality again. Insurance company lenders are preparing for 2026 with an appetite for commercial real estate lending and are shining bright as a stabilizing force for the years ahead.

Rate Climate

A steady decline in the 10-year Treasury yield has played a huge role in borrower confidence and has become a catalyst for a shift back to a long-term mindset. This is a sweet spot for life company lenders. The 10-year started the year near 5 percent but is holding now at a current range closer to, if not at, 4 percent. Most experienced borrowers are seeing this as an opportunity to lock in favorably priced debt, easily supported by current performance metrics, shifting a hope for near-term rate improvement in the next five years to enjoying the security of predictable, long-term costs and the stability of a legacy hold.

Competitive Pricing

While many of our correspondent life company lenders can quote fixed-rate terms of from three to 30 years, experienced legacy borrowers are taking advantage of the opportunity to refinance with longer-term loans again. Spreads on 10-year debt have come in dramatically. We are seeing spreads lock at 120 bps to 130 bps for conservatively leveraged loans under 60 percent loan-to-value, making all-in rates at or near 5.25 percent. For higher-leverage requests at 60-70 percent LTV, lenders are quoting spreads at 175-180 over the 10-year for a roughly 5.75 percent rate. This has closed the cost premium on long-term debt over five-year options.

Moreso, these are historically attractive long-term rates. For loan maturities on legacy hold assets that have amortized from the lower rate climate in the 2016-2017 vintage, new 10-year loans are coming in comfortably above debt service minimums. Cash-neutral refinances are turnkey, and cash-out proceeds are available where metrics and appreciation merit. With cap rates ranging between 5 and 6 percent, most product types (excluding office acquisitions) are still funding at well below replacement coss, and the improved rate climate has also made stable, fixed-rate, long-term debt appealing for these new investments again.

Allocations

In recent years, life company lenders have steadily grown their allocations to commercial real estate lending, making them an accessible source for new loans. With commercial mortgage yields performing better than corporate bonds in the current cycle, commercial real estate lending has become a preferred target for insurer income production. This is expected to remain consistent into 2026. Their loan portfolios grew a healthy 6.9 percent in 2024, according to the National Association of Insurance Commissioners, and we expect that they will meet or exceed similar growth in 2025 after two exceptional quarters for new production, pushing through to a strong close in the fourth quarter. Insurance lenders will be as active, if not more so, in the year ahead, with allocations already on deck and ready to deploy for 2026 fundings.

Asset Profiles

Life companies continue to focus their allocations on multifamily and industrial properties, but they have also become an active competitor for loans on neighborhood, single-tenant and grocery-anchored retail centers. Self storage is another asset class where insurance companies are competitive. It’s no secret that insurance lenders are at their best as an option for stabilized, performing assets. It’s almost a definitive requirement to meet their debt service thresholds. But for any owner of a legacy hold asset that can meet these standards, their debt is extremely appealing for stabilized performance. A growing number of life company sources are underwriting office again, with confidence building from a return-to-office movement and the reset in basis as price discovery aligns with market shifts and the new cost of capital. They are focused mainly on office assets in the multi-tenant format, preferring a diversified rent roll, but no longer standoffish to the asset class in general.

Assets in Transition

While bridge financing is not a historic target for their allocations, during the past couple of years insurance lenders have become a source in their pursuit of yield. This new offering aligns with their shift to a focus on five-year debt programs during the recent cycle. They are following the market and chasing yield where it makes sense. These loans can be paired with a participating or preferred equity structure, supporting new value-add acquisitions or repositioning assets slated for near-term performance enhancement, and the stability of a fixed rate with interest-only terms make them competitive with debt fund and banking options.

These loans often feature full-term interest only. Life companies remain creative for these structures when engaging with experienced sponsors. As an example, they are extremely adept in underwriting pre-stabilization construction takeout loans on new multifamily and self storage assets for either five-year or 10-year terms in permanent structures anticipating improving performance.

Life Company Appeal

Among the options out there from various commercial mortgage debt sources, insurers offer a unique set of benefits. Their non-recourse terms are appealing against recourse options offered by banks, and their ability to rate lock at application, straightforward underwriting and attentive post-loan servicing make them a preferred choice against other non-recourse options like CMBS and the GSEs. As long as commercial real estate yields are outperforming corporate bonds, life companies will remain willing lenders with ready allocations to commercial real estate.

Uncertainty about the the global economy may remain, but this makes long-term stability more appealing than ever moving into 2026 and the years ahead.