Insurers plan to increase private credit allocations despite rising concerns over market risks
Global insurers are continuing to increase their exposure to private credit, even as concerns grow over underwriting standards, default rates and valuations within the asset class, according to a report by Bloomberg citing new research from Marsh McLennan.
A survey of 123 insurers found that 57% of respondents worldwide expect to increase allocations to private credit over the next 12 to 24 months. Among US insurers, that figure rises to 65%, highlighting continued institutional demand for private market debt despite growing market volatility.
The findings represent a marked shift from Marsh McLennan’s previous survey in 2024, when just 32% of insurers said they intended to increase their exposure to private credit.
For the first time, insurers also expressed stronger demand for private credit than for investment-grade public fixed income. While 48% of respondents said they planned to increase allocations to public debt, private credit emerged as the preferred destination for new capital.
The results come at a time when parts of the private credit market are facing increased scrutiny. Retail investors have sought to redeem capital from some private credit funds this year amid concerns over the valuation of software-related assets, prompting several alternative asset managers, including Blackstone and Blue Owl Capital, to restrict withdrawals in certain vehicles.
Despite their appetite for the asset class, insurers identified a number of emerging risks. More than half of respondents cited deteriorating underwriting standards, weaker lender protections, rising default rates and the increased use of payment-in-kind (PIK) structures as key concerns. Around two-thirds also pointed to tighter spreads and a declining illiquidity premium as factors reducing the attractiveness of private credit relative to historical levels.
The findings suggest insurers remain committed to expanding private credit exposure but are becoming increasingly selective as competition intensifies and market conditions evolve.
