Since coming into office, the Trump administration has expanded immigrant deportations, which might endanger insurer investments in the real economy.
Last week, the Department of Homeland Security announced that more than half a million immigrants have been arrested this year.
So far in 2025, agencies such as ICE and the Customs and Border Protection have received $170 billion in funding.
Immigration officers have targeted construction sites. As such, real pain might start to be felt in the real economy of the US, due to inflationary pressure caused by labour shortages, which could drive up wages.
The hardest hit industries are construction and food production, which could also see prices in those sectors increase, too, all of which could have a negative effect on the US economy.
These problems could both affect the housing market itself, which could cause fixed income yields to dip, and private markets, or the 'real economy' that many insurers have invested in, by slowing down construction on real estate prices.
One of the main areas affected by the immigration environment is real estate, which is an important sector for insurers’ portfolios.
About 80.5% of all US insurer property investment is concentrated in the commercial space, with residential properties accounting for 14.6%.
While residential holdings are smaller, the segment is seeing quick growth; last year, residential loan holdings grew by nearly 42% according to research by the National Association of Insurance Commissioners (NAIC).
Immigration raids and their effects on the real estate and construction market have been predicted for some time. “The market view on the election is that the [Republican] agenda may be inflationary. That reinforces the idea that rates would stay higher for longer,” said Randy Brown, Chief Investment Officer of Sun Life, to Insurance Investor in 2024.
A survey published by the Associated General Contractors of America found that over the past six months, 28% of firms said they were affected, 5% said ICE officials had visited their site, 10% had lost workers due to the threat of a visit, and 20% said that concerns resulted in subcontractors losing staff.
According to reporting from the US media company National Public Radio, due to the shortage of workers, jobs are completed more slowly, thus resulting in higher prices for owners and contractors.
Therefore, inflationary pressure is to be expected on insurers as it will cost more to build homes that buyers already cannot afford. That means fewer mortgages or a drop in fixed-income profits for insurers.
Insurers are increasingly investing in so-called “real assets”, or tangible things such as real estate. Immigration actions could help to starve demand from the US housing market, because of the increased cost of building homes due to labour shortages and other delays.
Insurers, particularly life insurers, receive significant fixed income from investments in assets related to mortgages, primarily through holding mortgage-backed securities (MBS) and, to a lesser extent, whole-loan mortgages.
"Uncertainty about inflation could put unnecessary pressure on interest rates and stress real estate capital market conditions."
“A risk to the market outlook is uncertainty around tariffs, immigration reform, and tax reform,” said David Politano, Managing Director, Head of Debt Strategies, Real Estate, at MetLife Investment Management.
“We are less concerned about the direction of inflation given that inflation is positive for real estate income growth, but uncertainty about inflation could put unnecessary pressure on interest rates and stress real estate capital market conditions.”
That worst-case scenario, laid out by Politano, seems to have arrived. However, like with tariffs, insurers might have to wait several months before they start to see major impacts on the housing market.
Eight months after 'Liberation Day', consumer sentiment has dropped by 7% and nearly half of US consumers reported that inflation was one of their top concerns, according to research by McKinsey. While the figure is a bad omen for the economy, it might worsen if people feel priced out of property due to a rise in construction prices.
Risk broker Aon said that in inflationary times, investments in commercial real estate debt (mortgages) fare well. That may change if the government deports a significant part of the construction workforce.
The administration is suggesting that the deportations are giving opportunities to US workers, but many of those working in the industry say this is inaccurate. “Since we've done a terrible job of educating our domestic workforce, we've had to increase the pull from across our borders," said Jim Tobin, National Association of Home Builders (NAHB) President and CEO.
“Since we've done a terrible job of educating our domestic workforce, we've had to increase the pull from across our borders."
Cuts in the workforce will likely reduce homebuilding and drive up construction prices, all bad news for real asset investments.
Also, US job openings in October remained flat at just 7.67 million in October, up marginally from September’s 7.66 million, which could result in a further decrease in demand for housing.
For now, there is not enough data to show an impact on the housing market, but as with the news about tariffs, it could take time for the data to arrive and patterns to emerge.
“It's not likely that consumers will tolerate more food inflation or housing inflation because those are pain points right now.”
But when it does, most factors point to it not looking good for the housing market. “It's not possible to implement the level of tariffs and the deportation strategies that he proposed without those being extremely inflationary,” said Jim Kaniclides, Head of US Insurance, at Insight Investment in late 2024 to Insurance Investor.
Insurers will likely take hits to their real asset portfolios as deportations roll through the new year. The coming quarters will tell just how much.
