Alternative investments have become a core pillar of U.S. insurance portfolios, now representing nearly one-third of industry assets—approximately $2.7 trillion—according to new research from Clearwater Analytics. Drawing on NAIC data and information from nearly 400 Clearwater client insurers overseeing $4.4 trillion in assets, the report concludes that insurers’ embrace of private markets marks a structural transformation rather than a temporary allocation shift.  

Private credit is driving much of this growth. Privately placed bonds, direct lending, and commercial mortgage loans now dominate insurers’ alternative allocations, offering higher yields, stronger liability matching, and more stable long-term return potential. Allocation levels vary widely, from insurers holding only single-digit percentages of private assets to others committing more than half—and in some cases as much as 70–80%—of their portfolios to privates.  

Clearwater noted that the appeal of alternatives extends beyond performance. Insurers increasingly use private markets to diversify away from public-market volatility and create more predictable cash-flow profiles. At the same time, the rapid expansion has introduced significant operational challenges. The report found that valuation, accounting, reporting, and risk monitoring processes for private assets take three to five times longer than comparable tasks for traditional securities, exposing a growing disconnect between asset complexity and insurers’ aging technology infrastructure.  

“Alternatives have moved from the periphery to the core of insurance portfolios—they’ve already won,” said Kirat Singh, president of risk and alternative assets at Clearwater Analytics. “We’re seeing leading insurance companies shifting capital to privates and alts, some at 35% while others going as high as 70–80%.”  

The shift accelerated during the pandemic, when insurers sought assets less correlated to public market swings. Those allocations, once considered opportunistic, have now become permanent components of long-term strategy.  

However, legacy technology remains a major obstacle. Many insurers still rely on fragmented systems that struggle to integrate private credit, structured equity, real estate, and other alternative datasets. This creates blind spots in oversight and risk management—concerns that grow as allocations increase.  

“Institutional investors are embracing newer asset classes that legacy systems simply can’t handle,” said Matthew Vegari, head of Research at Clearwater Analytics. “Allocators need to see their investments in one place, on one system, especially in today’s risk environment.”