As the influence of private credit on the insurance industry grows, regulators and investors are taking a closer look at their exposures
New York, New York / October 19, 2026 – Private credit has become an insurance industry megatrend at the exact moment that private credit as an asset class is evolving. Insurance investors aren’t new to the world of private credit. Insurers have been direct lenders and involved in private credit funds for decades. But as private credit has expanded as an industry, private credit is playing a bigger role in insurance portfolios and the lines between asset managers and investors are getting increasingly blurry.
Private credit is a trillion dollar industry. When most people talk about private credit, what they mean is middle market direct lending. But private credit in the insurance world includes a lot more than that. Asset backed lending, specialty finance, and structured credit are all growing allocations in insurance portfolios. Alongside these investments, asset managers including Apollo, KKR, and others have purchased insurers and reinsurers and are now directly involved in the insurance industry itself.
So far, the response to this has been somewhat muted. The National Association of Insurance Commissioners has made adjustments to its workflows and working groups to ensure that their supervision of the industry is comprehensive. Regulators have been in active conversations with industry professionals about improving visibility into portfolios and ensuring capital charges are adequate.
However, recent months have seen dips in private credit performance, a federal probe launched against a life insurer owned by Guggenheim Partners CEO Mark Walter, as well as questions from Senators about the effectiveness of state oversight of the insurance industry. European regulators have also recently announced that they plan to step up supervision of private equity backed insurers as well as riskier portfolio products.
Private credit is showing all the hallmarks of a maturing asset class – both good and bad. For insurance investors, private credit is likely to remain a core part of portfolios but investors may adjust their approach over time in response to these shifting market dynamics.
Loans are still performing
The first quarter of this year raised alarm bells for some investors as a number of high profile private credit funds faced liquidity pressure. This situation isn’t new for veteran institutional investors, but these speedbumps did capture more attention than many expected in part because of the significant role private credit is playing in portfolios of all types.
Two quarters later, performance appears to be evening out. Fitch Ratings affirmed the stability of companies in their alternative investment manager review including: Apollo Global Management, Inc., Ares Management Corporation, Blackstone Inc., Blue Owl Capital Inc., Brookfield Asset Management Ltd., Brookfield Corporation, The Carlyle Group Inc., Foundation Holdco LP (Fortress), KKR & Co. Inc. and TPG, Inc. Which offer both private equity and private credit exposure.
“Despite softer private wealth flows in 1H26, net flows in the channel remained positive, as inflows into other products offset elevated redemptions from direct lending vehicles. Redemption requests appear to have eased from their 2Q26 peak, and long-term growth prospects remain favorable,” the ratings agency said in its outlook on private equity and private credit.
Still, competition remains high. Fitch analysts noted that “insurance partnerships continue to be a long-term growth opportunity for alternative investment managers, given insurers’ demand for long-duration assets and managers’ origination and investment capabilities. However, increased competition for insurance mandates and heightened regulatory scrutiny could pressure long-term performance, while growing interconnectedness could amplify business complexity and concentration risks.”
Both Fitch and insurance regulators have underlined recently the need for diversification within private equity and private credit investments. Risk based capital charges are likely to remain relatively predictable in the near-term but there is increased scrutiny on asset class performance and types of exposure.
Digital infrastructure poses concentration risk
Insurance investors have gone big into private credit financing of digital infrastructure whether that is through 144A bonds for projects, expanding commercial real estate lending, or through direct and asset backed lending to companies involved in the AI buildout.
US insurers held about $512 billion of bonds carrying private letter ratings at the end of 2025, according to a report published on Sept. 23 by the Capital Markets Bureau of the National Association of Insurance Commissioners.
The investment opportunity is significant, but so is the risk of portfolio concentration. Hyperscalers are relying on off balance sheet financing to cover leases not yet commenced as well as many other startup costs including digital hardware, land, and power. As soon as these investments move on balance sheet, investors may realize they have more exposure to digital infrastructure than they anticipated.
Even though the loans are performing and defaults remain low, financing levels are hitting new highs and with AI in particular it is unclear whether revenues will follow. Insurers have the luxury of long time horizons which means that many of these emerging trends can likely play out at relatively low risk. But we may see an evolution in portfolio construction as well as the insurance industry’s relationship with private credit as an asset class if regulators grow concerned with the amount of capital being put to work in this area.
Investors, industry practitioners and academics will be coming together on October 20 in New York to discuss these trends at the upcoming AIF Institute Fall Insurance Investing Symposium.