A recent analysis by Clearwater Analytics reveals that life insurers face multilayered exposure to the private-credit sector, raising concerns about potential risks linked to their investment strategies. The findings show that approximately one-quarter of the life insurance companies tracked by Clearwater not only hold equity stakes in private-credit funds but also extend loans to those same funds. Typically, these insurers lend roughly twice the amount they have invested in fund shares, amplifying both potential returns and risks.

Private-credit funds, which bundle loans and bonds often extended to riskier companies or secured by assets such as machinery, intellectual property, or mortgages, have become an increasingly significant part of insurer portfolios. The median life insurer monitored in the report had raised its allocation to private credit to 9% by early 2026, nearly doubling its exposure since 2019. Insurers commonly invest in these funds to gain diversified exposure to hundreds of deals, while also directly purchasing private bonds and loans.

Disclosures to the National Association of Insurance Commissioners (NAIC) include extensive individual investment records, making it challenging to trace where insurers hold simultaneous equity and debt positions within the same private-credit funds. This complexity, combined with the growing interconnectedness between insurers and fund managers—many of whom own insurance companies—complicates regulatory oversight. Leading alternative asset firms such as Apollo Global Management and KKR now own insurance businesses, further blurring the lines between fund management and insurance.

Despite regulators’ access to data on limited partnerships and lending activities, state insurance regulators face difficulties keeping pace with the rapid expansion of private credit. The Financial Stability Board (FSB), a global group of financial regulators, has warned that these layered relationships can create “difficult-to-detect pockets of risks” and may exacerbate losses during market downturns.

Based on Clearwater’s client data, which primarily encompasses midsize insurers, life insurers have extended around $24 billion in loans to private-credit funds where they hold equity positions valued at approximately $12 billion. Matthew Vegari, Clearwater’s head of research, emphasized that while the firm has not identified systemic risks thus far, the practice of insurers acting as both equity holders and lenders to the same funds raises concerns about potential “cross-contamination” of losses.

Investors have recently grown wary of default risks associated with the riskier loan segments funded by private-credit vehicles, adding further scrutiny to insurers’ growing involvement in this space. As private credit continues to expand, the insurance industry’s exposure to these complex financial structures remains an area closely monitored by regulators and market participants alike.