For the most part, new issuance of private-label RMBS has been on hold since 2008. But defaults and downgrades to securities vehicles linked to residential mortgages are still somewhat of a reality, according to the most recent RMBS report from the National Association of Insurance Commissioners.  

Overall, insurers exposure to RMBS subsided in recent years. 3% of the U.S. insurance industry's total investments for 2011 were linked to RMBS, NAIC said.

About half of those deals are backed by prime mortgages, while 35% are linked to subprime home loans.

Three years ago, U.S. insurers' exposure to private-label RMBS hit $150 billion. But by the end of 2011, that number shrunk to $123 billion, which is only part of the insurance industry's $5.3 trillion in total investments, NAIC said.

NAIC ran its own analysis and declared that "80% (of the RMBS) are considered investment grade, with the remainder considered below investment grade."

While firms like Allstate and Metlife sued banks and associated entities for selling insurers securities backed by mortgages, exposures still remain on the insurers' earnings reports. 

A brief look at Allstate's latest quarterly 10-K filing with the SEC makes this clear. By late September, residential mortgage-backed securities represented 38% of all under-investment grade, fixed-income securities in a gross unrealized loss position at Allstate, according to the filing. A gross unrealized loss is a projected future loss on a company's investment.    

Subprime mortgage bonds represented $69 million of the $92 million RMBS gross unrealized projected losses, Allstate said in its filing with the Securities and Exchange Commission.

Allstate also attributed wider credit spreads on fixed-income securities to depreciation in the commercial and residential real estate markets.

"Wider spreads are largely due to the risk associated with the underlying collateral supporting certain residential and commercial mortgage-backed securities and macroeconomic conditions impacting certain sectors of asset classes," Allstate wrote in its report.