US insurers have become major investors in private credit, a $2 trillion market now facing rising defaults, prompting regulators and investors to assess whether growing exposure could create pressure on capital, liquidity, and earnings.
Life insurers seeking long-duration yield have increased allocations to direct lending, private asset-backed finance, structured credit, infrastructure lending, and middle-market loans, according to a new Forbes report. Industry estimates indicate insurers now account for 23.4% of private credit capital providers, representing between $0.9 trillion and $1.1 trillion of investment exposure. Barclays found that private credit holdings among US life insurers increased by more than 20% in 2025 and reached about 10% of total assets, exceeding 15% among some private-equity-affiliated insurers, including Apollo-backed Athene and KKR-backed Global Atlantic.
The growing allocation is attracting attention from regulators. The US Treasury Department has assembled a team to assess insurer exposure, while the International Monetary Fund has warned that insurers holding leveraged private credit instruments could face larger-than-expected losses during periods of stress.
The regulatory focus follows mounting signs of strain across portions of the private credit market.
Fitch Ratings reported in May 2026 that the US private credit default rate reached a record 6.0% in April. The agency also estimated that private-credit-backed corporate borrowers recorded a 9.2% default rate during 2025. Morgan Stanley has estimated that defaults could approach 8% under weaker economic conditions, while UBS outlined a severe downside scenario of 14%–15%. S&P Global Ratings cited a speculative-grade benchmark of approximately 3.7%–3.75%, while Moody’s estimated a 1.6%–4.7% default range depending on how distressed restructurings are treated.
Moody’s estimates that debt exchanges, maturity extensions, and other distressed restructurings accounted for roughly 65% of private credit defaults during 2025. Rising payment-in-kind income among business development companies has also emerged as a closely watched indicator of borrower strain.
Additional measures suggest pressure beneath headline default figures. CAIA data indicates that 6.4% of private credit loans carried deferred-interest, or “bad PIK,” structures in early 2026. Reuters, citing MSCI data, reported that more than one-tenth of loans held by private credit funds had been marked down by at least 50%.
Fitch data shows that companies with EBITDA of $25 million or less recorded default rates of 15.8% in 2025, with healthcare and consumer sectors among the areas experiencing elevated stress.
Proskauer’s Private Credit Default Index, which tracks 697 loans totaling $189.2 billion, reported a 2.73% default rate in the first quarter of 2026, up from 1.84% two quarters earlier. Bank of America’s credit strategy team has described private credit as “the lowest quality asset class across our leveraged finance universe.”
For insurers, the concern extends beyond defaults alone.
Private assets are generally less liquid than publicly traded bonds, making sales more difficult during periods of market stress. Rising impairments can reduce investment income, while downgrades can increase funding costs and place pressure on capital requirements. Delayed cash flows may also create asset-liability matching challenges.
The Financial Stability Board (FSB) recently warned that banks, insurers, asset managers, and private equity firms are increasingly connected through private credit markets. The watchdog cited opaque valuation practices, leverage, liquidity risks, borrower concentration, and a lack of standardized and transparent data among areas requiring closer supervision.
The FSB also noted that drawn and undrawn bank credit lines to the sector totaled at least $220 billion, while commercial estimates suggested the figure could be significantly higher. The organization warned that increasingly complex relationships between banks, insurers, asset managers, and private credit funds could amplify stress during adverse market conditions.
