Mortgage-Backed Securities Primer for Insurers & Risk PoolsView PDF
Mortgage-Backed Securities (MBS) are bonds that derive its value from a pool of mortgages. These securities can be structured like a traditional asset-backed security, but are also commonly separated (derived) into different tranches that offer investors various levels of credit risk and compensation.
Insurance companies and risk pools (that have the investment flexibility to do so) consider mortgage-backed securities for their fixed income portfolio as they can potentially outperform corporate or government bonds, while also possibly offering less risk than other asset-backed securities.
Mortgage-Backed Securities fall into three types/categories based on the issuer: Agency MBS | Commercial MBS | Residential MBS