The relationship between insurers and private credit is expected to strengthen further this year, potentially drawing increased regulatory scrutiny, according to a report by Bloomberg citing new research by Moody’s Ratings.
As insurers continue their search for higher yields, many are turning to private credit investments, particularly in asset-based finance opportunities. Key areas of focus include consumer finance, commercial finance, hard assets, and financial assets, Moody’s noted in its Tuesday report.
Private credit funds are also anticipated to expand into retail investment opportunities, a move that could attract heightened regulatory attention, with Moody’s highlighting that retail private debt assets are growing at a faster pace than institutional fundraising, signalling a shift in the market.
Regulators, including the National Association of Insurance Commissioners, have already taken steps to address concerns by approving initiatives to challenge credit ratings of private debt investments if they are deemed to misrepresent risk levels.
Moody’s report also pointed to potential risks in the growing insurer-private credit partnerships, including a lack of transparency and significant exposure to single-name assets.
