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Private credit has become a larger part of the insurance discussion, though most of the attention has focused on life insurers. For the P&C sector, the more important issue is not direct exposure alone, but what happens if earnings support from those assets becomes less dependable at a time when underwriting conditions are less favorable.
Private Credit in Insurance: Life versus P&C
The difference between the life and P&C sectors is still worth noting briefly. An NAIC report estimated that life insurers held about $1,118 billion of private-credit investments in 2024, equal to roughly 19% of life insurers' balance sheets. 1 By comparison, a conservative measure of identified private-credit-related assets puts the P&C sector at about $94.1 billion at year-end 2024, or about 3.3% of total P&C cash and invested assets. 1 Life insurers therefore carry the heavier direct exposure. For P&C carriers, the issue is less about balance-sheet concentration and more about how weaker investment support could affect earnings.
Why Private Credit Matters for the P&C sector
That distinction matters because investment income has become a larger contributor to P&C results in recent years. Treasury reported that net investment income represented about 9% of P&C sector revenue in 2024, up from roughly 7.8% in 2020. Over the same period, P&C net investment income rose from $53.4 billion to $87.8 billion, helped in part by shorter-duration portfolios and higher cash and short-term balances that benefited more quickly from the higher-rate environment. 2
That support matters more when underwriting conditions are under pressure. Casualty lines continue to face strain from claim severity, social inflation, and adverse prior-year development, particularly in commercial auto liability and other liability. 3 In that setting, the issue is not necessarily a sudden credit event. It may instead be a slower loss of earnings support or confidence in asset values that leaves underwriting carrying more of the load.
A Slow Squeeze, Not a Shock: The bigger risk for many P&C carriers may not be a sudden credit event. It may be a gradual loss of earnings support, reduced confidence in asset values, and less tolerance for underwriting volatility at a time when pricing and reserve conditions are already challenging
How Asset Pressure Can Affect Underwriting
A weaker or less dependable investment contribution leaves less room for underwriting underperformance. If investment income carries less of the earnings story, management may need better combined ratios to support the same return targets. 3.4 Pressure on asset values can also affect capital flexibility and risk tolerance.
Reuters reported in early April that Treasury's discussions with insurance regulators were focused on leverage, ratings consistency, offshore reinsurance, and liquidity.5 Those are investment issues, but they also affect confidence in reported balance-sheet strength. When confidence weakens, tolerance for underwriting volatility often narrows. The effect may appear operationally before it is obvious in headline results. In practice, that can mean firmer pricing where the market allows it, less willingness to stretch on terms, tighter portfolio selection, or greater caution in casualty-heavy business. 3,4,5
Illustrative Earnings-Support Scenarios
A simple scenario helps show the scale. Every 100 basis points of underperformance on the identified private-credit-related asset base would reduce annual P&C net investment income by just under $1 billion. Spread across the sector, that is roughly equivalent to about one-tenth of a point of combined-ratio pressure if carriers had to make up the difference through underwriting performance alone. 1,6
Even a more severe stress case would not by itself suggest a systemwide shock, but it does show how a relatively small asset bucket can begin to matter when pricing softens and casualty results remain under pressure.
* Combined-ratio effect is estimated by comparing the reduction in annual net investment income against roughly $902.6 billion of 2024 P&C net premiums earned.1,6
Where Pressure Could Show Up First in P&C
Within P&C, the carriers most likely to feel this pressure first may be those with the least room for earnings disappointment rather than simply those with the largest nominal private-credit exposure. That could include carriers that rely more heavily on investment income, have more aggressive or less liquid asset allocations, write heavier longer-tail casualty business, or are already facing reserve pressure or less favorable pricing conditions. 3,4,5
For P&C executives, the main questions are whether investment assumptions are doing too much work in the earnings story and whether tolerance for underwriting volatility is beginning to narrow. They should also watch whether regulators begin to scrutinize valuation support, liquidity, and capital flexibility more broadly across the insurance industry rather than remaining concentrated in life. 1,3,4
Bottom Line
The most likely scenario is a slow squeeze on results, with the investment cushion becoming less dependable just as underwriting conditions become less forgiving.
How Alan Gray Can Help
For Alan Gray clients, the issue is less about predicting a private-credit event than about understanding what happens when investment support becomes less dependable. That is where operating discipline matters.
- Claims Audit work can help carriers assess whether underwriting and claims execution still line up with profitability expectations.
- Legal Spend Management can help preserve margin in casualty lines already under pressure from severity, social inflation, or reserve development.
- Reinsurance and data-integrity capabilities can help strengthen confidence in reported results when boards, auditors, regulators, or counterparties want clearer support for the numbers.
Citations
- NAIC, Asset Mix, Year-End 2024 (May 1, 2025); Steve Bardzik and Michele Wong, Mortgage Loans/CRE YE 2024 (Sept. 1, 2025); Jennifer Johnson and Mark Fischer, U.S. Insurers' CLO Exposure at Year-End 2024 (Dec. 2025); Jennifer Johnson, US Insurers' Bank Loan Exposure Year-End 2024 (Sept. 1, 2025).
- Annual Report on the Insurance Industry 2025, Federal Insurance Office, U.S. Department of the Treasury, 2025.
- Property & Casualty Insurance Industry Analysis Report (Mid-Year 2025), National Association of Insurance Commissioners, 2025
- U.S. P&C Insurer Underwriting Profits Stable Despite Headwinds in 2026, Fitch Ratings, January 21, 2026.
- Rajesh Kumar Singh and Pete Schroeder, "US Treasury to meet with insurance regulators to discuss private credit markets," Reuters, April 1, 2026.
- 2024 Year-End P/C Industry Snapshot, National Association of Insurance Commissioners, 2025.
