Private credit holdings comprise 44% of bonds held within US insurance industry

Written by Adam Cadle

30/07/2024

A decade-long trend of insurers steadily increasing their private credit holdings continued in 2023, comprising 44% of the bonds held within the insurance industry, compared with around 27% in 2013, according to AM Best.

AM Best noted that insurers’ private credit holdings grew 5.7% in 2023 to nearly $1.7trn. The annual growth was the lowest in at least a decade, after increasing around 10% annually from 2019-2022.

AM Best also said non-mortgage backed structured securities (non-MBS) such as collateralised loan obligations as a growth driver. This shift has also coincided with more insurers having private equity/asset managers (PE/AM) that hold controlling interests along with investment manager subsidiaries.

Lending gaps created by traditional banking institutions stepping back have been increasingly filled by non-bank lenders such as PE/AM firms, some of which may originate these assets, continue to enter the US life/annuity market in a variety of ways. These approaches include outright acquisitions of insurance companies to use as platforms to provide permanent capital and acquire additional blocks of business, or through minority investment or a similar arrangement, to earn fee income from managing large portions of a company’s investment portfolio.

According to AM Best, over 41% of US life/annuity insurers outsourced more than 10% of their invested assets in 2023, up marginally from 2022, but up from just under one third of companies in 2016.

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