Life insurers are strong, stable institutions with nearly 80 years of experience investing in private credit. Our resilience is clear — during the COVID-19 pandemic, we maintained more than twice the required capital while paying out record-level claims for two consecutive years.
This page explains the role private credit plays in insurer portfolios and addresses common concerns around risk, liquidity, oversight and market stability. Using facts and data, it provides clear context on these issues and shows how insurers responsibly use private credit to meet the demand for long-term guarantees.
How does ACLI define private credit?
Private credit can take many forms, so it’s important to be clear about how it’s defined — and how life insurers approach it. Broadly speaking, any non-publicly registered bond is considered a private security, although the degree of transparency and liquidity of the private security can vary significantly.
Most life insurers’ “private” bonds are either institutional securities with a high degree of liquidity and transparency or traditional private placements with designations from the National Association of Insurance Commissioners (NAIC).
The NAIC Capital Markets Bureau offers a narrower definition of private credit: securities with private distribution methods and private transparency characteristics. This typically means that the bond is privately placed and has a private letter rating (PLR).
S&P Global reports that only about 6% of the industry’s aggregate assets are invested in what we might consider truly private credit — purely privately placed debt (non-institutional) with a PLR. This includes direct lending, infrastructure lending and asset-backed financing.
How does private credit align with life insurers’ long-term approach?
Our business is about matching long-duration promises with long-term investments. The private bond market offers better opportunities to purchase long-term bonds, which aligns well with many of our core products that last decades, such as life insurance. Because of that, life insurers are well positioned to invest in relatively “illiquid” assets like private credit in exchange for a higher rate of return. That higher return ultimately benefits consumers.
Are private credit assets held by life insurers speculative or risky?
No. Insurers hold high-quality, investment-grade private credit subject to robust supervision by regulators. According to the ACLI Life Insurers Fact Book, 92.4% of private credit is investment grade, which means it carries an NAIC designation of 1 or 2. A Federal Reserve paper on private placements also found their credit quality exceeded public bonds. S&P Global's analysis indicates that life insurers are managing the liquidity and complexity risks associated with private credit responsibly.
What is the regulatory oversight framework for private credit?
Life insurers — which comprise roughly 90% of investors in U.S. private corporate bonds — are subject to rigorous, state-based regulation in every jurisdiction where we are domiciled and licensed to operate.
The National Association of Insurance Commissioners (NAIC) plays a central role, establishing standards and coordinating oversight across the U.S. insurance system. And the framework continues to evolve. As NAIC President and Virginia Insurance Commissioner Scott White noted in The Wall Street Journal, beginning in 2018, insurers have been required to submit private credit ratings to enhance transparency and has added even more robust guardrails since.
For instance, regulators review insurer investments in private credit annually and now have the authority to challenge and lower credit ratings they deem inaccurate. They are continuing to increase the amount of capital that insurers are required to hold for more complex investments.
Together, these efforts are designed to bring more scrutiny to insurer investment strategies, while helping ensure we hold the right amount of capital to back our financial guarantees.
Are life insurers’ investments in private credit a potential source of systemic risk?
No. Private credit fits life insurers’ business model. By matching long-duration promises with long-term investments, we can withstand volatility without forced selling — helping protect against downward spirals and support market stability.
Independent experts agree. A recent IAIS evaluation found that increased allocations to “alternative assets,” including private credit, do not currently threaten global financial stability. The head of the IMF’s Monetary and Capital Markets Department also noted in MarketWatch that the industry’s exposure remains very small and is not a systemic risk.