Insurance Sector’s Private Credit Ties Has Investors Concerned

Investors are reportedly getting worried about life insurance companies’ exposure to the private credit world.

According to a Tuesday (April 14) Financial Times (FT) report, insurance is now one of the lowest-performing sectors in the U.S. investment-grade bond index, while the stocks of major insurance companies have trailed the S&P 500 index so far in 2026.

Concerns over loose underwriting standards and lending to businesses vulnerable to AI disruption have triggered a wave of redemption requests at private credit funds, the FT said. These worries have spread to insurers’ investment portfolios, which have taken on significantly more private credit assets in recent years.

“When people are worried about asset prices, they sell insurance companies,” Connor Fitzgerald, fixed income portfolio manager at Wellington Management, told the FT. “It’s like a private credit second derivative trade.”

As the FT noted, life insurance companies typically invest more heavily in lower-risk assets, like government bonds. However, the industry has increased its exposure to illiquid private credit in recent years in the hope of capturing better long-term returns. Meanwhile, some insurers have themselves been taken over by private capital outfits.

Private credit assets held by the U.S. life insurance industry grew by more than a fifth last year, bringing the sector’s exposure to about 10% of total assets at the end of 2025, the FT said, citing an analysis by Barclays.

The bank said this exposure could top 15% for insurers affiliated with private equity firms, like Apollo-backed Athene and Global Atlantic, which is backed by KKR.

The FT report is the latest in a series of recent news reports about growing concerns over private credit, although worries about the industry are not a new phenomenon.

“Private credit is no longer a niche corner of finance,” PYMNTS wrote late last year. “As nonbank lending expands and increasingly interweaves with banks, insurers and FinTech firms, the risks posed by opaque exposures and shifting funding channels become a systemic concern.”

The report also pointed to Federal Reserve figures showing a surge in bank loan commitments to nonbank financial institutions, making the nonbank sector a major part of bank portfolios.

“If a sharp economic downturn, rising interest rates or refinancing shock triggers defaults in private credit, the fallout could ripple broadly, from private firms to funds, to banks and beyond,” PYMNTS added.