Insurance Brief: EU Re/Insurers Eye Private Credit
EU-based insurers and reinsurers (re/insurers) have increased their exposure to private credit in recent years. This reflects a broader trend toward portfolio diversification and yield enhancement.
Certain segments--such as distressed debt, junior securitization tranches, and leveraged buyout debt funds--may carry higher risks than others. However, re/insurers' relatively low exposure to these segments limits their effect on investment portfolios' risk-return profiles.
We will continue to monitor EU re/insurers' rising exposure to private credit, given its illiquidity and distinct risk profile.
EU-based re/insurers have increased their allocation to private credit to 5.8% in second-quarter 2025 from 3.9% in fourth-quarter 2016. This is according to the European Insurance and Occupational Pensions Authority (EIOPA). The increase reflects re/insurers' aim to diversify investment portfolios and achieve higher yields.
Nevertheless, EU-based re/insurers' exposure to private credit is low. Even excluding traditional private placements, mortgages, and alternatives, the small private credit subset of privately placed and privately rated bonds and loans alone comprises 6% of U.S. life insurers' investment portfolios--0.2% more than EU-based re/insurers' total allocation to private credit.
Life insurers typically invest more in private credit than industry peers. This is not least due to the prevalence of longer-tailed insurance products, such as life savings and retirement. Private credit accounted for 5.1% or €515 billion of EU-based re/insurers' investments in 2024, of which life insurers contributed 57.5%, composite insurers 23.2%, non-life insurers 14.6%, and reinsurers--with their generally shorter-tail business--only 4.7%.
Many global multiline insurers and reinsurers developed private credit expertise more than a decade ago. However, smaller, regional insurers began to build their internal capabilities at a significantly later stage and often still rely on external fund managers.
The Solvency II update, scheduled for January 2027, could further influence investment strategies and lower capital charges for securitized assets, such as collateralized loan obligations (CLOs). The Solvency II update from 2019 has already lowered regulatory capital requirements for unrated debt under certain conditions, which increased the attractiveness of private credit investments for re/insurers.
Chart 1 | Re/insurers' private credit exposure is upPrivate credit exposure to total assets, by type of asset
Q--Quarter. Source: European Insurance and Occupational Pensions Authority.
Private credit is typically unrated and often subject to higher capital charges. This is because it tends to be riskier and less liquid than other asset classes. We note, however, that some segments within private credit, for example promissory notes and highly rated senior tranches of CLOs, can be less risky than traditional bond investments. We consider these factors in our assessments of re/insurers' capitalization by applying risk-based capital charges to their investments and reflect their liquidity profiles in our ratings.
Re/insurers' exposure to illiquid assets is sizable in absolute terms but limited in relative terms. For example, EIOPA data suggest that German re/insurers hold about €92 billion in illiquid, non-listed corporate bonds, while their French peers hold about €28 billion. Mortgages and loans account for about 50% of total private credit exposure in Germany and 25% in France. The figures are even higher when including mortgages and loans held within investment funds.
We think promissory note loans contribute to German re/insurers' relatively large exposure to non-listed corporate bonds. These notes are often issued by creditworthy domestic entities, including the German government, municipalities, and highly rated large corporates--a home bias that is common among EU-based re/insurers.
We will continue to monitor EU-based re/insurers' exposure to private credit and its implications for their financial strength and resilience. Even though we do not expect the upcoming Solvency II update to affect re/insurers' asset allocation significantly, adjusted regulatory capital charges could spur a shift in investments. While not prescriptive, the capital charges established under Solvency II set parameters for investment decisions.
Our ratings reflect our regularly updated views on re/insurers' capitalization, investment risks, and liquidity. We also engage with insurers to understand how their exposure to specific asset classes aligns with their investment expertise. In our view, this is crucial for evaluating the effectiveness of risk management strategies and the sustainability of investment portfolios in a changing regulatory and market environment.
Volker KudszusFrankfurt+49-693-399-9192volker.kudszus@spglobal.com
Viviane Ly Frankfurt 49-693-399-9120 viviane.ly@spglobal.com Marc-Philippe Juilliard Paris 33-14-075-2510 m-philippe.juilliard@spglobal.com
Taos D Fudji Milan 390272111276 taos.fudji@spglobal.com
Johannes Bender Frankfurt 49-693-399-9196 johannes.bender@spglobal.com
Andreas Lundgren Harell Stockholm 46-8-440-5921 andreas.lundgren.harell@spglobal.com
Simon AshworthLondon+44-20-7176-7243simon.ashworth@spglobal.com
