U.S. life insurers, battling the effects of a bad economy, appear to be poised to beat banks and the general market in two areas.

Losses on U.S. life insurers’ commercial mortgage loans (CML) and commercial mortgage-backed securities (CMBS) will be less than banks and the general market, according to a new report from Moody’s Investors Service.

The agency believes that the insurers’ commercial real estate (CRE) losses will “grow during the medium term.” Nevertheless, the “high quality” of life insurers’ CMLs and CMBS investments should make the losses “manageable,” Moody’s said.

“In our expected case scenario, we anticipate losses of approximately $10 billion for insurers over the next two to three years, which will dampen earnings, but should not result in many rating downgrades,” said Jeffrey Berg, a Moody’s senior vice president, in a statement.

U.S. life insurer exposure to CMLs, CMBS, and real estate equity is “moderate,” estimated at about 16% of invested assets and 150% of regulatory capital. The life industry was much more heavily exposed to the commercial real estate markets 20 years ago when the last CRE downturn occurred, Moody’s said.

“Life insurers’ portfolios today demonstrate that they have learned from past missteps dealing with commercial real estate,” Berg said.

The report suggests losses on the U.S. life insurers’ CML portfolios will likely be much lighter than banks’ losses on CMLs, as well as CMLs within CMBS deals.

Insurers’ loans are well-diversified by both geography and property type, and they also are conservatively underwritten and well-laddered by maturity, as well as being seasoned loans on fully-stabilized and leased properties, Moody’s said.

“In general, however,” the analyst points out, “we see insurers as being rather slower to recognize CML losses relative to their securities holdings and relative to the banks’.”

Moody’s cautioned that the losses from its “stress case” scenario (which, it adds, would be a highly remote and unprecedented event) could come to $40 billion to $45 billion, an amount that would have “a major capital impact,” resulting in many downgrades–some being multi-notch, Moody’s said.

“In recognition of continued deterioration of the CRE market, we have updated our loss assumptions in our stress testing of life insurers,” Berg said. Moody’s increased the average lifetime expected- and stress-case loss factors for CMLs to about 3% (or ~$8 billion) for the industry, and 10% (or ~$27 billion), respectively, from about 2% and 5%, based on the rating agency’s recent publication on commercial real estate.

For CMBS, Moody’s boosted the average lifetime expected- and stress- case loss factors for CMBS to 1% (~$2 billion for industry) and 8% (~$16 billion), respectively, from 0.7% and 1.4%, respectively.