Why Private Credit Matters to Insurers

Private credit has become a major source of financing for U.S. companies and an increasingly important issue for insurers. For life insurers, the clearest exposure is on the investment side. For P&C insurers, the more relevant issue may be indirect exposure through the companies they insure. In both cases, the same challenge runs through the discussion: private credit can be harder to value, harder to compare, and harder to see through than traditional public-market debt.¹

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What private credit includes

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At its simplest, private credit refers to debt or debt-like financing that is negotiated outside the public markets. Depending on the source, the term can include direct loans, middle-market lending, mortgage loans, bank loans, privately placed debt, CLO-related exposure, and certain structured or fund-based vehicles. That breadth matters because there is no single market definition and no single statutory insurance reporting line that captures private credit cleanly. Any discussion of insurer exposure must start with that basic limitation.^{1, 2}

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A market that has grown quickly

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Even with that caveat, the market is now large enough that insurers cannot treat it as peripheral. The Office of Financial Research said the U.S. private credit market, including business development companies, exceeded $1.6 trillion at year-end 2024. The same report said private credit fund assets under management more than tripled over the last decade, representing a 14% compound annual growth rate, and noted that the market is now larger than the traditional U.S. markets for broadly syndicated loans and high-yield corporate bonds.³

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The market’s sector mix also matters. Morgan Stanley said recent direct-lending commitments have focused on senior secured loans to sponsor-backed middle-market companies, with a preference for software and business services. Reuters reported in March 2026 that software accounted for about 12% of CLO holdings, making it the largest subsector in those portfolios. That concentration has drawn added attention because investors have also begun to worry that artificial intelligence could pressure parts of the software sector, especially where business models are more exposed to disruption or refinancing needs.^{4, 5} Those concentrations are relevant for insurers because they influence both where life insurers may have investment exposure and where P&C insurers may face underwriting exposure.

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Why life insurers are more exposed on investments

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Within insurance, the clearest direct exposure sits with life insurers. Life carriers generally have longer-dated liabilities and greater need for spread income, which makes less-liquid credit assets a more natural fit. P&C insurers, by contrast, tend to place more weight on liquidity and claims-paying flexibility. NAIC year-end 2024 data show just how different the sectors are in scale: U.S. insurers reported about $8.98 trillion of cash and invested assets, including roughly $5.75 trillion for life insurers and $2.86 trillion for P&C insurers.²

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A conservative way to measure exposure

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Because private credit is not disclosed in one clean statutory bucket, the most defensible way to frame insurer exposure is to begin with a conservative estimate based on clearly identified categories commonly associated with private credit: mortgage loans, bank loans, and CLOs. The table below should be read as an illustrative conservative estimate of identified private-credit-related assets, not as a full measure of everything that might fall under a broader private credit definition.¹

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‍Illustrative Conservative Estimate of Identified Private-Credit-Related Assets, U.S. insurers, year-end 2024 ($ billions)

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*Bank-loan figures for life and P&C are allocated from the NAIC industry total using reported sector shares. Totals may not sum perfectly because published figures are rounded. Sources: NAIC year-end 2024 asset, mortgage loan, CLO, and bank-loan reports.^{2, 6, 7, 8}

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What the conservative table shows

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Even on that conservative basis, the difference between sectors is clear. Identified private-credit-related assets represented about 19.4% of life insurers’ invested assets at year-end 2024, compared with about 3.3% for P&C insurers. For the industry, the comparable conservative estimate figure is about 13.5%. Within that identified subtotal, mortgage loans are the dominant category for life insurers, while the much smaller P&C subtotal is more mixed, with CLOs accounting for the largest share.^{2, 6, 7, 8}

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The broader picture may be larger

That table with the conservative estimate is useful precisely because it is cautious. But it most likely understates how large life-side exposure may be under broader market definitions. In March 2026, The Wall Street Journal, citing AM Best, reported that life and annuity insurers held an estimated $1.8 trillion in private credit in 2025, equal to a record 46% of their total debt holdings. That figure appears to use a wider definition than the categories shown above, but it points in the same direction: once the lens broadens, life insurers’ connection to private credit looks materially larger.⁹

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A different kind of risk challenge

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The more important question is not simply how much private credit insurers own; it is how easy that exposure is to understand. Public bonds are far from simple, but they are generally easier to price, compare, and monitor. Private credit often depends more heavily on internal assumptions, manager reporting, private valuations, and structures that are less transparent to outside stakeholders. That does not make the assets inappropriate. However, it does mean that governance, reporting, and challenge processes matter more.^{1, 3}

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Where the pressure shows up

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This is where the issue becomes more than an investment-allocation story. Valuation can be more judgment-based when observable market prices are limited. Concentration can be harder to identify when exposure is spread across managers, structures, affiliated vehicles, and sectors. Liquidity can appear manageable in ordinary conditions but looks very different when spreads widen, refinancing slows, or liability behavior changes. These challenges matter most on the life side because that is where the exposures are largest, but the underlying concerns are broader.^{1, 3}

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Two examples already in insurer portfolios

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CLOs and mortgage loans illustrate the point. NAIC data show U.S. insurers held about $271.1 billion of CLO exposure at year-end 2024 and about $820.3 billion of mortgage loans. In both cases, life insurers accounted for the large majority. Neither asset class is new to insurers. The issue is that as more exposure sits in less-liquid and less-transparent parts of the market, the need for clear reporting and disciplined oversight becomes more important.^{6, 7}

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Private credit also matters on the P&C side

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For P&C insurers, the more interesting issue may not be balance-sheet investment exposure at all. It may be underwriting exposure through the companies they insure.

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Private credit is now large enough, and broad enough, that many P&C insurers are likely to touch it indirectly. That can happen at the lender level through coverage written for fund managers, business development companies, specialty finance firms, servicers, and related entities. It can also happen at the borrower level, where financial stress at private-credit-backed portfolio companies may lead to directors and officers, errors and omissions, cyber, employment practices, fiduciary, crime, or even casualty claims. Public data does not appear to offer a reliable industrywide figure for that underwriting exposure, but the overall footprint may be significant.^{3, 10}

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A large and connected ecosystem

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The best sense of scale comes from the private credit market itself. In a March 2026 report, the Office of Financial Research said the market exceeded $1.6 trillion at year-end 2024. The same report identified more than 2,000 private credit funds in regulatory filings, along with an estimated $410 billion to $540 billion of related financing exposure and about $300 billion of limited-partner capital commitments. Those figures do not measure P&C underwriting exposure directly, but they do show that private credit is now a large and highly connected part of the financial system.³

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Why the underwriting impact may be concentrated

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There is also reason to think the underwriting footprint may be concentrated rather than random. Morgan Stanley’s comments on software and business services in direct lending, combined with Reuters’ reporting on software exposure in CLOs, suggest that private credit has meaningful ties to sectors already important to commercial P&C insurers. That does not imply a direct one-for-one claims problem. It suggests that the underwriting implications deserve closer attention than a simple asset-allocation discussion might imply.^{4, 5}

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How Alan Gray may help insurers respond

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For many insurers, the challenge may be less about building private credit portfolios and more about understanding where private-credit-related exposure may be surfacing across underwriting, claims, litigation, and legal spend.

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If financially stressed managers, lenders, or portfolio companies begin generating more complex claims, the difficulty is not always identifying a single large event; it is seeing patterns clearly enough to understand whether concentrations are building, whether claims are becoming more complex, and whether legal costs are being managed consistently across matters.

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Alan Gray’s claims audit, legal spend management, and related analytics capabilities may help insurers bring more structure to issues that are otherwise difficult to isolate. On the P&C side, that could mean better visibility into claims and litigation trends in sectors where private credit is active, stronger oversight of legal spend in complex matters, and more consistent reporting that helps carriers identify emerging concentrations earlier.

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Conclusion

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Private credit is now large, fast-growing, and connected enough that insurers can no longer treat it as a peripheral issue. For life insurers, the clearest issue is direct investment exposure, which can look very different depending on how broadly private credit is defined. For P&C insurers, the more relevant issue may be indirect exposure through the managers, lenders, and portfolio companies they insure.

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Either way, the same basic challenge remains. Private credit can be harder to value, harder to monitor, and harder to explain than traditional public-market debt. That does not make it a flawed asset class, it suggests that insurers need a clear view of where the exposure sits, how concentrated it may be, and whether the control framework around it is strong enough to match the market’s growing importance.^{1, 3, 9}

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A few terms used in this article

• Direct lending: Loans made directly to companies outside the public bond market, often to middle-market or sponsor-backed borrowers.
• Private placements: Debt sold privately to institutional investors rather than issued in the public market; these have long been part of many life insurers’ portfolios.
• CLOs: Securities backed by pools of corporate loans, with insurers typically investing in rated portions of the structure rather than the underlying loans directly.
• Bank loans: Corporate loans, often floating-rate, that may be held directly or through structured vehicles.
• Mortgage loans: Commercial or other mortgage lending held directly by insurers, especially life insurers.
• Private asset-backed finance: Privately structured financings backed by pools of assets or cash flows rather than traditional unsecured corporate borrowing.

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Sources

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1. “Insurance Topics | Private Credit.” National Association of Insurance Commissioners, 1 Nov. 2025.
2. Johnson, Jennifer, and Michele Wong. Asset Mix, Year-End 2024. National Association of Insurance Commissioners, 1 May 2025.
3. Berg, Ted, and Jung Hoon Lee. Measuring Counterparty Exposures to Private Credit. Office of Financial Research, 12 Mar. 2026.
4. "Private Credit 2026 Outlook.” Morgan Stanley Investment Management, 16 Dec. 2025.
5. Sen, Anirban. “Debt Investors Offloading Exposure to Software Companies Is Latest Sign of Pain.” Reuters, 17 Mar. 2026.
6. Johnson, Jennifer, and Mark Fischer. U.S. Insurers’ CLO Exposure at Year-End 2024. National Association of Insurance Commissioners, Dec. 2025.
7. Bardzik, Steve, and Michele Wong. Mortgage Loans/CRE YE 2024. National Association of Insurance Commissioners, 1 Sept. 2025.
8. Johnson, Jennifer. US Insurers’ Bank Loan Exposure Year-End 2024. National Association of Insurance Commissioners, 1 Sept. 2025.
9. Gillers, Heather. “Life Insurers Hold More Private Credit Than Ever.” The Wall Street Journal, 5 Mar. 2026.
10. “Management Liability Ins. Mkt. in 2025: Stability Amid Evolving Risks.” Aon, 18 Mar. 2025.

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