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Insurance companies are shifting their investments from bonds and stocks to private credit, aiming to secure higher returns and better align with long-term obligations. This trend is driven by market conditions, regulatory changes, and the need for predictable income.
Key takeaways:
This move is reshaping portfolios, with insurers exploring asset-backed lending, infrastructure loans, and new investment structures. Partnerships with asset managers and banks are also helping insurers manage risks and streamline operations. As private credit assets grow, more insurers are entering this space, driving demand for advanced debt trading platforms and innovative investment strategies.
Insurance companies are increasingly turning to private credit, driven by a mix of market dynamics, operational demands, and regulatory shifts. Let’s explore how these factors are shaping this trend.
The lending landscape has opened new doors for insurers willing to explore private credit. With banks scaling back on commercial real estate lending - down approximately 17% due to stricter regulations - private credit has stepped in to fill the gap. Banks are juggling the challenge of managing legacy loan losses while trying to generate fresh business.
"They are adapting to a rapidly changed market environment", – Ty Gerschick, head of debt capital markets for the Americas at CBRE Investment Management
The appeal lies in the yields. New-issue private loans now offer returns exceeding 10% on an unlevered basis, far outpacing what insurers can typically earn in public markets. This yield advantage is particularly important as insurers work to meet their commitments to policyholders.
Emerging markets also present untapped opportunities, now accounting for over 60% of global GDP growth. Regulatory changes in regions like India, Africa, and Southeast Asia are further paving the way for private credit investments.
Private credit aligns perfectly with insurers’ need for steady, predictable income. These investments often come with regular contractual interest payments, providing a reliable cash flow that helps insurers manage their ongoing obligations without solely depending on the ups and downs of public markets.
Additionally, private debt offers a level of customization that public bonds simply can’t match. Insurers can tailor these investments to fit their liability profiles and risk tolerance, adjusting factors like duration and payment schedules to suit their specific needs.
Life insurers, in particular, have embraced this flexibility. By the end of 2023, their combined exposure to broadly syndicated loans and middle-market collateralized loan obligations hit a record $212 billion. The added illiquidity premium in these investments further boosts their appeal, delivering higher yields compared to public markets.
Evolving regulations have played a major role in accelerating insurers’ shift to private credit. Since the 2007–09 financial crisis, life insurers have doubled the share of their general account assets allocated to below-investment-grade corporate debt. This shift reflects both regulatory changes and strategic adjustments to a transformed market environment.
The National Association of Insurance Commissioners' (NAIC) principles-based bond definition, set to take effect in 2024, is another catalyst. It provides more detailed insurance investment data, helping insurers structure private credit portfolios with greater precision.
At the same time, banks have been forced to scale back their lending activities due to stricter regulations, leaving a gap that insurers have stepped in to fill. Offshore reinsurance - totaling $1 trillion in ceded reserves between 2017 and 2023 - has also led to more efficient private credit structures. These developments have solidified insurers’ role as key players in both public and private credit markets.
Looking ahead, global private credit assets under management are expected to reach $2.6 trillion by 2029. This marks a significant shift from traditional bank-led lending to a more diversified system where insurers are taking center stage.
"Private credit is no longer an alternative - it is the architecture of capital in emerging markets in 2025. At Delphos, we see it as the cornerstone of capital formation - blending yield, security, and impact where traditional finance has stepped back." – Bart Turtelboom, Chairman and CEO, Delphos
These regulatory and economic shifts have created a new investment landscape, positioning private credit as a vital tool for insurers looking to balance long-term obligations with competitive returns.
Insurers design their private credit investments to maximize capital efficiency while tapping into a $1.6 trillion market. The choice of structure helps insurers balance control, regulatory capital treatment, and operational demands.
Insurers typically rely on three main investment structures.
Managed accounts involve separately managed account (SMA) agreements with asset managers. This setup allows insurers to directly hold middle-market loans while benefiting from the expertise of asset managers.
Individual deal investments let insurers engage in specific transactions on a deal-by-deal basis. This approach provides the highest level of control but requires substantial internal resources and expertise to assess each opportunity.
Platform structures strike a balance between control and efficiency. These include arrangements like rated feeder vehicles and continuation funds. For example, in November 2024, BlackRock launched a $1.3 billion private credit continuation fund, transferring 300 first-lien loans. Similarly, Vista Credit Partners closed a $460 million continuation vehicle backed by Pantheon, providing liquidity to investors in its 2016 vintage fund.
The chosen structure impacts how insurers address risk-based capital (RBC) charges. Rated feeder structures, for instance, can offer more favorable RBC treatment compared to direct investments.
To complement these investment structures, insurers often form strategic partnerships to improve efficiency and access to private credit.
Asset management partnerships are a popular choice. Blackstone Credit and Insurance (BXCI), for example, manages $237 billion in third-party insurance assets as of March 31, while Goldman Sachs Asset Management reports that 62% of insurance investors plan to increase private market allocations this year.
Joint ventures are gaining momentum as well. In September 2023, Prudential Financial, Warburg Pincus, and other global institutional investors launched Prismic Life Reinsurance Ltd. with $1 billion in equity. PGIM Multi-Asset Solutions handles asset management for this venture, allowing insurers to share risks and pool expertise.
Bank partnerships are evolving as traditional lenders adjust their balance sheets. In July 2024, Sumitomo Mitsui Banking Corporation completed a transaction led by Pantheon, transferring a strip of performing loan investments into a private credit vehicle. These collaborations help banks manage regulatory constraints while providing insurers with access to quality assets.
"Our partnership with Blackstone will further cement our market leading position in pension risk transfer, and enable us to address growing demand for public-private hybrid investment products. L&G will benefit from a more diverse pipeline of assets for our annuity book, and growth in asset management as we develop more sophisticated investment solutions for clients around the world."
– António Simões, L&G's group CEO
Some insurers are also building in-house asset management capabilities to gain more control over their investments and reduce fees.
| Structure Type | Capital Treatment | Control Level | Operational Complexity | Best For |
|---|---|---|---|---|
| Direct/SMA | On balance sheet; higher RBC charges | High – direct asset ownership | Moderate – requires internal expertise | Large insurers with dedicated teams |
| Rated Feeder | Better blended RBC charges | Medium – fund participation | Low – outsourced management | Capital-efficient growth |
| Continuation Funds | Off-balance sheet options | Low – limited partner status | Low – professional management | Diversified exposure |
"The first thing about being an insurance company is that everything is viewed through a lens of capital. You have to allocate capital against everything that you own."
– David Ells, Partner and Portfolio Manager at Ares Management
Rated feeder structures have become particularly appealing due to their ability to address capital concerns. These funds issue senior debt tranches, often rated investment-grade, allowing insurers to acquire a mix of notes and equity interests.
CFO structures provide another option, offering a commingled portfolio of fund interests. For instance, in April 2025, Neuberger launched a $1.2 billion CFO backed by a diversified pool of private equity, private credit, and secondary market interests. This approach broadens access and enhances liquidity for insurers.
In Europe, innovation continues. In November 2024, Barings issued the first European private credit CLO, featuring exposure to 61 different obligors sourced through its European direct lending platform. This securitization model offers insurers a way to gain diversified credit exposure.
"Now there is a specific allocation for private credit for insurance company investors, whereas like ten years ago, let's say that wasn't even necessarily on their radar."
– Ryan Moreno, Partner and Co-head of Leveraged Finance at DLA Piper
These diverse structures and partnerships highlight the insurance industry's evolving approach to private credit. With some insurers allocating as much as 40% of their portfolios to this asset class, selecting the right structure is critical for aligning capital needs, risk appetite, and operational capabilities while targeting attractive yields.
Private credit has grown far beyond its traditional role in corporate lending. Insurers are now diving into a variety of asset categories that promise higher returns adjusted for risk while also diversifying their portfolios. This shift reflects both market opportunities and the need to align long-term liabilities with dependable assets. These newer asset types are part of a broader trend, as insurers continue reshaping their portfolios to achieve better yields and manage risk more effectively.
Asset-based finance (ABF) and asset-based lending (ABL) have emerged as popular strategies for diversifying private credit portfolios. Unlike corporate bonds, which rely on an issuer's overall performance, ABF ties returns directly to asset cash flows, offering an added layer of protection. According to a Preqin survey, 58% of investors plan to prioritize ABL strategies by 2025.
Major insurers are already making big moves in this space. For instance, Sixth Street has teamed up with Northwestern Mutual to manage $13 billion in ABF-focused assets. Guardian Life is expanding into investment-grade private credit with an emphasis on ABL and infrastructure, and MetLife has announced plans to grow its private debt platform with a focus on ABF. The Orange County Employees' Retirement System is also allocating half of its private credit investments to ABL and niche strategies. A 2024 Moody's study revealed that 44% of 30 major insurers aim to increase their long-term allocations to ABF and private placements, making it a top strategy for 2025.
In addition to ABF, insurers are increasingly turning to infrastructure and real estate loans, which offer stable cash flows and align well with their financial goals.
Commercial real estate (CRE) debt has become a particularly appealing option as banks scale back their lending in this sector. With CRE debt totaling approximately $6.1 trillion, the market provides considerable opportunities for private credit managers. The reduced competition from traditional lenders has enabled insurers to secure better terms and covenants, enhancing downside protection.
Infrastructure debt is also on the rise, especially for insurers looking for assets that match their long-term liabilities. These investments deliver steady and predictable cash flows, supporting insurers' payout schedules while offering flexibility with customized financing structures and extended time horizons. International insurers are also recognizing the value of these strategies. For example, Finland's pension fund Elo (managing €30 billion in assets) has highlighted ABL as a promising strategy due to its yield advantages and scalability. Similarly, London CIV in the UK (with £32 billion in assets under management) plans to allocate up to 30% of its Private Debt Fund II to ABL.
As private credit continues to evolve, its market size and institutional backing are growing at a rapid pace. By 2024, the private credit market surpassed $2 trillion, and PitchBook estimates its value at around $1.6 trillion, with approximately $500 billion in dry powder ready to be deployed. According to McKinsey, the potential addressable market for private credit could exceed $30 trillion across various asset classes. PwC research, covering firms managing $1.24 trillion in private credit assets, estimates the average total addressable market at roughly $31 trillion.
The share of privately placed asset-backed securities (ABS) has also grown, rising from 10% to 15.5%, with total ABS holdings tripling to about $125 billion. Private equity-owned insurers have played a significant role here, holding nearly 40% of financial and ABS private placements in 2024, even though they control just 14% of the industry's general account assets. Notable contributions include $21 billion from Apollo's Athene and related entities, $18 billion from KKR's Global Atlantic, and $10 billion from Blackstone's Everlake and Resolution Life.
Looking ahead, the appetite for private credit remains strong. A survey found that 62% of insurance CIOs and CFOs plan to increase their allocations to private markets in 2025. Similarly, 58% of respondents in a Goldman Sachs Asset Management survey said they intend to boost their private credit investments. Mike Siegel, Global Head of Insurance Asset Management at GSAM, remarked:
"Our 14th Annual Global Insurance Survey shows insurers are navigating evolving macroeconomic concerns by rotating toward asset classes with the potential to provide both attractive risk-adjusted returns and diversification benefits."
This shift into new asset categories demonstrates a more strategic and nuanced approach to portfolio construction. Insurers are carefully balancing their need for higher yields with risk management and regulatory requirements, ensuring they remain well-positioned for the future.
The growing interest of insurers in private credit is reshaping debt trading platforms. As insurers move away from traditional corporate bonds to seek higher returns, they are turning to advanced technology to navigate, analyze, and manage diverse debt portfolios more effectively. With plans to significantly increase private credit investments, insurers are driving demand for platforms that offer capabilities surpassing those of conventional debt trading methods. This trend highlights the critical role digital platforms play in simplifying and securing these transactions.
Modern debt trading platforms are revolutionizing the way insurers engage with private credit investments. These platforms provide the tools needed for secure and transparent transactions. Take Debexpert as an example: it operates as an online marketplace for debt trading, offering features such as portfolio analytics, encrypted file sharing, real-time buyer activity tracking, and multiple auction formats (including English, Dutch, Sealed-bid, and Hybrid). Additionally, customizable notifications enhance the platform's functionality, making it easier for institutions to manage their investments efficiently.
Beyond improving transaction efficiency, these platforms also open doors to a broader spectrum of debt assets. As insurers venture into new areas of private credit, platforms like Debexpert become essential, offering access to assets such as auto notes and real estate loans. Their portfolio valuation tools, backed by deep expertise, help insurers accurately assess different types of debt. This capability is particularly crucial given the rise in privately placed asset-backed securities (ABS), which have grown from 10% to 15.5% of total holdings, with ABS investments tripling to around $125 billion. Encrypted communication features further streamline the process, allowing insurers to quickly verify portfolio details.
The importance of these technological advancements is echoed by industry leaders. David C West, Global Head of CLO Product Strategy at Deutsche Bank, observed:
"With a pull-back from arranging banks, private credit funds could establish market share during a period of heightened market volatility".
This shift toward tech-enabled debt trading empowers insurers to efficiently acquire varied debt portfolios, capturing yields of approximately 10% from new-issue private loans. Such advancements are critical as insurers continue adjusting their portfolios to favor private credit investments.
As insurers increasingly turn to private credit, several trends are shaping how this market evolves and adapts.
Three major factors are influencing insurers' growing interest in private credit. First, the promise of higher yields continues to be a strong draw, with new-issue private loans offering yields of around 10% on an unlevered basis. Second, diversification has become a priority as insurers look beyond traditional asset classes to balance risk and improve returns. Lastly, insurers are aligning their long-term liabilities with suitable assets. Matt Armas, Global Head of Insurance at Goldman Sachs Asset Management, explains:
"This year they report taking a risk-on approach and favoring high quality fixed income assets and private credit, which can offer improved income, diversification, and risk management. This has led insurers into an optimal asset allocation, but they recognize that they cannot settle into complacency."
These factors collectively set the stage for both challenges and opportunities in the private credit market.
The private credit sector is on track for considerable growth, with global assets under management expected to hit $3 trillion by 2028. This growth is accompanied by a near doubling of available capital, or "dry powder", since 2019.
These projections highlight the broader shifts in debt trading platforms and investment strategies. David Miller, Head of Global Private Credit & Equity at Morgan Stanley, notes:
"Amid today's market conditions, we continue to take a proactive approach, which includes closely analyzing companies' earnings and free cash-flow generation."
This expansion is also opening doors for retail investors. Asset managers are responding by introducing evergreen funds and private credit ETFs to meet the rising demand. However, with increased allocations, insurers are urged to carefully monitor risks like credit quality and asset-liability mismatches.
The growth of private credit is also reshaping the debt value chain. As one industry analysis puts it:
"The rise of the private credit ecosystem is causing a fundamental realignment in the debt value chain in capital markets, prompting financial services broadly to bend toward its gravitational pull."
Platforms such as Debexpert are stepping up to meet insurers' needs, offering tools for secure transactions and in-depth analysis of diverse debt assets.
Insurers are turning to private credit as a compelling investment choice because it delivers higher yields, broader portfolio diversification, and better risk management compared to traditional options like bonds and stocks. In today’s unpredictable market conditions, private credit stands out by offering a steadier income stream, making it an appealing solution for meeting yield expectations.
On top of that, shifts in financial regulations and persistently low interest rates have made conventional investments less attractive. Private credit provides insurers with access to tailored opportunities that align with their specific risk tolerance and return goals, enabling them to stay competitive in a tough economic landscape.
Investing in private credit offers insurers a chance to achieve higher yields and broader portfolio diversification compared to sticking with public markets. These investments can deliver appealing returns, particularly in a low-interest-rate environment, making them a useful tool for meeting yield goals.
That said, private credit isn’t without its challenges. It typically comes with lower liquidity, which can make it harder to sell or exit these investments quickly. There’s also a greater risk of default, especially during economic downturns, since these loans are often issued to borrowers with less-established financial track records. To navigate these risks while reaping the benefits, insurers need to focus on thorough risk assessment and disciplined portfolio management.
Regulatory shifts are prompting insurers to rethink how they approach private credit investments. With new guidelines from the NAIC and heightened oversight, insurers are now paying closer attention to credit ratings and ensuring they meet stricter capital requirements.
The goal is to strike a balance: achieving higher returns while managing risks and staying within the boundaries of changing regulations. By fine-tuning their strategies, insurers can adapt to these new demands and still grow their private credit portfolios with confidence.
More than a decade of Ivan's career has been dedicated to Finance, Banking and Digital Solutions. From these three areas, the idea of a fintech solution called Debepxert was born. He started his career in Big Four consulting and continued in the industry, working as a CFO for publicly traded and digital companies. Ivan came into the debt industry in 2019, when company Debexpert started its first operations. Over the past few years the company, following his lead, has become a technological leader in the US, opened its offices in 10 countries and achieved a record level of sales - 700 debt portfolios per year.
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