Insurance firms expanding their investments in private debt segments, according to Moody's analysis.
## Booming Private Credit Investments: A Global Phenomenon Among Insurance Companies
Insurance firms across the globe are showing a growing appetite for private credit investments, as they seek higher returns and portfolio diversification. Here's a closer look at the current trends and anticipated growth in this sector:
### European Market (EMEA)
The European insurance industry is witnessing a surge in private credit allocations, mirroring the global trend. European insurers held approximately €500bn in private credit by the end of 2024, with the UK leading the pack. Private credit averages 18% of total investments, with some insurers reaching up to 45%. Despite this, the UK's private credit allocations are still higher than those in continental Europe, which represent around 13% of total investment portfolios [1].
Apollo Global Management views Europe as a key region for private credit growth due to its underdeveloped market compared to the US [2]. Fixed-rate investments are popular in the region, offering stability and predictability in returns, while the asset class's potential for high recoveries and lower defaults is also appealing [2].
### United States
The US life insurance industry has significantly increased its investment in private credit, with about one-third of its total cash and invested assets allocated to this sector in 2024, amounting to a substantial portion of its $6 trillion assets [4]. The high yield premiums compared to public bonds (around 80 basis points higher) and the strategic advantages of private placements are key drivers for this growth [5]. Private equity-owned life insurers are particularly active in expanding private credit investments.
Insurers are continuing to seek higher allocations to private credit, with 58% planning to increase their investments in this area [1][2]. Popular asset classes include fixed-rate investments, the private placement market, and direct lending strategies, which utilize structures like rated-feeder or CLOs to capture stronger yields while managing regulatory capital requirements [4].
### Global Outlook
The trend points towards a robust growth in private credit investments by insurance companies in both EMEA and the US. Moody's Ratings predicts this trend to continue growing, with around 80% of Moody's survey respondents planning to increase their holdings of at least one class of private credit over the long term [3].
However, Moody's warns of potential risks in alternative asset managers turning to retail investments [3]. For most insurers, the benefits of investing in private credit assets are expected to outweigh the risks.
In conclusion, the global insurance sector is embracing private credit investments as a means to achieve higher returns and diversify their portfolios. Fixed-rate investments and private placements are currently the most favored asset classes, offering stability and yield advantages. This trend is anticipated to continue, with the US and Europe leading the way in private credit growth.
Insurance firms worldwide are actively increasing their private credit investments, driven by the pursuit of higher returns and portfolio diversification. In particular, European insurers hold approximately €500bn in private credit, with the UK leading in private credit allocations, averaging 18% of total investments. Meanwhile, US life insurers have allocated about one-third of their total assets to private credit. The trend indicates a robust growth in private credit investments, with Moody's predicting this growth to continue in both EMEA and the US.
