Private Credit Becomes Core Allocation for North American Insurers, S&P Global Reports
Private credit is rapidly emerging as a central pillar in North American insurers’ investment strategies, according to a new report from S&P Global Ratings titled “The Rise of Private Credit in Insurers’ Investment Portfolios.” The report highlights how insurers—particularly life companies—are accelerating their exposure to private market debt to enhance yield and diversify away from traditional public bonds.
“Many fixed-income investors, including insurers, have increasingly turned to private credit to reap the benefits of added diversity in their investment strategies and enhanced yield potential,” said Carmi Margalit, S&P Global Ratings’ life insurance sector lead. The shift reflects a broader transformation within financial services, as institutional investors seek alternatives to offset persistently low real yields and tighter corporate spreads.
However, S&P cautions that private credit’s illiquidity and opacity pose structural challenges for insurers. These investments—typically privately placed corporate bonds and non-mortgage structured finance (NMSF) bonds)—are not easily tradable and often must be held to maturity, limiting insurers’ ability to rebalance during periods of market stress.
The growth trajectory has not been uniform across the insurance landscape. Life insurers, with their long-dated liabilities and predictable cash flows, have emerged as the heaviest allocators. As of December 31, 2024, life insurers held approximately $218 billion in privately rated corporate bonds and $71 billion in privately rated NMSF bonds, according to S&P’s analysis. By contrast, property/casualty (P&C) insurers—which manage shorter-duration, claims-driven portfolios—hold only a small fraction of that exposure.
Despite the rapid rise in allocations, S&P Global’s ratings on insurers have not been materially affected. Private credit remains a relatively modest portion of the sector’s more than $8 trillion in total invested assets, and the associated risks appear to be well managed to date.