US state insurance regulators are stepping up their scrutiny of insurers’ exposure to private credit as concerns grow over the risks posed by the rapidly expanding asset class, according to a report by the Wall Street Journal citing comments from Susan Ochs, acting insurance commissioner for New Jersey.
Speaking at the summer conference of the National Association of Insurance Commissioners (NAIC), Ochs revealed that insurance commissioners have been holding private discussions with insurers to gain a clearer understanding of how major investors in private credit assess the risks within their portfolios.
She said that regulators had received first-hand perspectives from significant participants in the private credit market, and that the discussions are intended to help regulators strengthen their ability to monitor potential vulnerabilities across the insurance sector.
Private credit has become an increasingly important component of insurers’ investment portfolios, accounting for as much as a quarter of total insurer holdings, according to previously reported estimates.
The increased regulatory attention comes amid growing scrutiny of the private credit market, which has expanded rapidly as insurers, asset managers and other institutional investors have sought higher yields outside traditional public bond markets.
Regulators are particularly focused on whether existing supervisory frameworks are adequate to assess the risks associated with privately originated loans, where valuations can be less transparent and assets are generally less liquid than publicly traded debt.
The issue has also attracted attention at the US Treasury. Treasury Secretary Scott Bessent asked state insurance commissioners in May whether they have sufficient regulatory tools to evaluate insurers’ private credit exposures, according to an account of the meeting provided by a state commissioner.
The NAIC has also conducted its own internal assessment of the insurance industry’s aggregate exposure to private credit. The analysis has been circulated privately among regulators, Ochs said.
For private equity and private credit managers, the regulatory focus highlights the growing importance of insurers as a source of capital. Life insurers in particular have become major investors in private assets because the long-duration nature of their liabilities can align with private credit investments.
However, greater reliance on insurers as a funding source could also bring increased regulatory oversight of private-market assets, particularly if concerns emerge around credit quality, valuation practices, liquidity or concentration risk.
