Nearly half of all bonds held by US life insurers are now privately placed, a record concentration that has accelerated the National Association of Insurance Commissioners' (NAIC) overhaul of how it tracks and discloses investment risk.
Privately placed bonds, as defined under the NAIC's broad bond classification framework, reached 48.4% of total life industry bonds at year-end 2025, up from 37.4% five years earlier, according to the S&P Global Market Intelligence 2026 US Insurance Investments Market Report. The shift extends a decade-long trend. Bonds' share of total life insurer assets has fallen nearly 7 percentage points since 2015.
The migration forced a regulatory response. The NAIC's Principles-Based Bond Definition, effective January 1, 2025, requires insurers to classify assets on economic substance rather than legal form. The aim is to prevent structured instruments from receiving bond capital treatment they do not merit.
Implementation had uneven effects. Life general accounts transferred nearly $15.40 billion in assets from Schedule D, Part 1 to other investment schedules, with Lincoln National Corp. accounting for more than one-quarter of those transfers. On the P&C side, approximately 650 bonds valued at $1.81 billion shifted to other schedules.
Bond allocations in life insurer portfolios fell to 66.8% from 67.4% year over year as carriers shifted into higher-yielding alternatives. The NAIC's overhauled Schedule D now breaks the nearly $4 trillion US life general account bond book into issuer credit obligations and asset-backed securities. That split settled at 72.8% to 27.2%, with corporate bonds dominating issuer credit obligations at 74.1%.
Transparency about how life insurers manage portfolios is a top regulatory priority for 2026, NAIC President Scott White told S&P Global Market Intelligence in March. White said regulators need to be aware of insurers reallocating into complex, illiquid alternatives or into offshore jurisdictions with different regulatory frameworks.
Carrie Mears, an investment specialist with the Iowa Department of Insurance and Financial Services, said the new commissioner-level Invested Assets Task Force would make oversight more "nimble and responsive." Mears also flagged residential mortgage loans as a growth area regulators plan to investigate, noting the asset class has expanded into exposures broader than initially anticipated.
P&C bond allocations fell 88 basis points in 2025 to 68.6%. Common equities rose to a four-year high of 16.2% of total assets while Schedule BA holdings reached a record 7.1% of invested assets. The S&P Global report attributes the more measured shift to shorter-tail liability structures and higher liquidity requirements in P&C.
For brokers, the findings reinforce a picture that has emerged across multiple reports this year. The portfolios backing the life and annuity products brokers place are increasingly concentrated in assets that are harder to price and less liquid. S&P Global identifies liquidity, complexity, and mounting regulatory scrutiny as the key risks embedded in the new portfolio management approaches carriers have adopted.
That's a genuine, concrete question worth putting to a carrier directly rather than treating portfolio composition as a black box: for any annuity or life product carrying long-dated guarantees, ask what proportion of the general account backing that specific product sits in privately placed bonds or Schedule BA assets, and how the carrier's own liquidity stress testing accounts for that concentration. A carrier unable or unwilling to answer that question with any specificity is itself a data point worth weighing against one that can.
