Private Credit Unease Prompts Treasury-Insurance Regulators Meetings

The Treasury Department is reportedly planning talks with insurance regulators about the private credit market.

The talks between the Treasury and domestic and international insurance regulators are being prompted by concerns about liquidity, transparency and lending discipline in the $2 trillion private credit space, Reuters reported Sunday (March 29).

While those worries have been mounting in recent weeks, sources familiar with the matter told Reuters that Treasury Secretary Scott Bessent had been planning to consult with insurance regulators since January.

The sources added that the first of the meetings could be announced as soon as Wednesday (April 1), with the outcome aimed at improving regulatory oversight of private credit lenders as they increasingly interact with regulated ​financial institutions.

While the treasury has no regulatory control over the insurance sector, Bessent hopes to make his department a “convening authority, resource and forum” for all 50 U.S. state insurance regulators, the Reuters report said.

Sources said that the department is eager to get regulators’ feedback on the increasing use of ​fund-level leverage, the consistency of private credit ratings, the use of offshore reinsurance and the liquidity of investments in ​private credit markets.

The report cites comments Bessent made in February to the Economic Club of Dallas, where he argued that when assets shift from private credit lenders into regulated financial institutions, like banks, pension funds or captive insurance companies, “Treasury gets involved.”

“I am concerned with watching, how does this get to the regulated financial ​system,” he added.

Regulators have been expressing concern over the size of private credit outfits and other components of the nonbank financial institution (NFBI) space for some time.

For example, a report late last year from the Financial Stability Board (FSB) found that the value of assets held by these groups — which also include hedge funds and insurers — expanded at more than twice the rate of assets in the banking industry during 2024.

During that year, the report said, the non-bank space grew by 9.4%, while the banking sector grew by 4.7%. The NBFI sector grew its total assets to 51% ($256.8 trillion) of total global financial assets, versus $191 trillion for banks.

Nevertheless, the banking and NBFI industries are increasingly interconnected, the report said, “broadening the channels through which shocks can propagate across sectors and jurisdictions.”

The board also flagged “severe limitations in the availability of data for private credit in statistical and regulatory reports,” partially because “there was no standard definition of private credit activities” between countries, making it difficult to identify them.