North American and European insurers trimmed their private equity allocations in 2025 - but the capital has not left alternatives. It has moved into private credit, and at scale. Blackstone's credit and insurance segment grew 18% to $375.5 billion in 2024 and reached $432.3 billion by the third quarter of 2025, reflecting the appetite for private credit strategies even as private equity allocations softened. The 2025 pullback in private equity is better understood as a rotation than a retreat.
The allocation data comes from an S&P Global Market Intelligence analysis of Preqin figures. North American insurers' median allocation to private equity fell to 2.3% of investment portfolios from 2.8% in 2024. European insurers saw a steeper relative drop, with median allocation declining to 1.8% from 2.9% - the first year-over-year decline in either region in five years.
The drivers are distinct but reinforcing. The first is private equity's ongoing exit challenge, which has slowed the return of capital from investments and made the asset class less attractive to institutions managing liquidity needs. Preqin's 2025 Global Reports found that 80% of surveyed investors identified exits as one of their top concerns for the next 12 months.
The second is regulatory, particularly acute in Europe. Under the Solvency II standard formula, private equity investments that do not qualify for preferential treatment attract a capital charge of 49% plus a symmetric adjustment - a burden that has historically kept European insurers' allocations to the asset class low, averaging around 2% for life insurers and 1% for non-life insurers.
Relief may be approaching on the regulatory side. A reviewed Solvency II framework, with formal application expected from 30 January 2027, simplifies the Long-Term Equity Investment framework, under which eligible investments can benefit from a significantly reduced capital requirement of 22%. Aberdeen Investments has described the revised framework as a potential turning point, arguing that LTEI reforms could "materially reshape insurers' approach to equity allocation, capital efficiency and investment in the real economy."
The scale of insurer appetite for private credit gives the rotation story its context. The 20 global insurers with the largest allocation to private credit collectively held $80.43 billion in the asset class, with individual allocations ranging from 11.3% to 35.5% of assets under management, according to With Intelligence. Strong earnings - particularly among property and casualty insurers - have provided ready capital to deploy across alternatives, with private credit offering the illiquidity premium insurers value without the exit-related liquidity challenges that have made private equity less attractive in the current cycle.
The longer-term relationship between private equity and the insurance sector has been one of deepening rather than retreating ties, with several large alternative asset managers acquiring insurers outright in recent years to combine the insurer's capital base with the asset manager's fee-generating investment platform. The 2025 dip in private equity allocations sits within that structural context - a cyclical adjustment rather than a structural shift, driven by exit timing and regulatory capital rather than a change in the fundamental appeal of the asset class.
