S&P Global Ratings will “monitor” EU-based insurers’ and reinsurers’ exposure to private credit, which has increased in recent years as they aim to diversify investment portfolios and generate higher yields.
Insurers’ and reinsurers’ allocations to private credit grew to 5.8 per cent in the second quarter of 2025, up from 3.9 per cent in the fourth quarter of 2016, according to the European Insurance and Occupational Pensions Authority (EIOPA).
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Life insurers typically invest more in private credit than their industry peers, due to the prevalence of longer-tailed insurance products, such as life savings and retirement.
S&P Global Ratings said the move to private credit exposure reflected “a broader trend toward portfolio diversification and yield enhancement”.
While some segments, including distressed debt, junior securitisation tranches, and leveraged buyout debt funds, may carry higher risks than others, the ratings agency noted that re/insurers’ relatively low exposure to these segments “limits their effect on investment portfolios’ risk-return profiles”.
Excluding traditional private placements, mortgages, and alternatives, the small private credit subset of privately-placed and privately-rated bonds and loans alone comprises six per cent of US life insurers’ investment portfolios, reported S&P Global Ratings. This is 0.2 per cent more than EU-based re/insurers’ total allocation to private credit.
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Data from EIOPA found that German re/insurers hold approximately €92bn (£79.7bn) in illiquid, non-listed corporate bonds, while their French peers hold around €28bn.
Mortgages and loans account for about 50 per cent of total private credit exposure in Germany and 25 per cent in France, with both figures rising when including mortgages and loans held within investment funds.
“EU-based re/insurers’ exposure to illiquid assets is sizable in absolute terms but limited in relative terms,” said Volker Kudszus, credit analyst at S&P Global Ratings.
“We will continue to monitor their exposure to private credit and its implications for their financial strength and resilience.”
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