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Home Themes Private Credit

Why Global Insurers Are Diving into Private Credit Despite Risks

by Team Lumida
June 7, 2024
in Private Credit
Reading Time: 3 mins read
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Photo by Christian Wiediger on Unsplash

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Key Takeaways:

  • 1. Nearly 80% of global insurers plan to increase private credit holdings.
  • 2.Insurers shift to private credit due to attractive returns over public markets.
  • 3.Rising delinquencies and defaults may pose long-term risks.

What Happened?

Global insurers are gearing up to expand their investments in the growing private credit market, a recent Moody’s Ratings report reveals. A survey conducted by Moody’s among the world’s largest insurers shows that nearly 80% of respondents intend to increase their holdings in at least one class of private credit.

This trend has already seen insurers in the U.S. boost their private credit holdings to 36% of their total investments in the region, driven by the promise of higher returns compared to the volatile public credit market.

Why It Matters?

The shift toward private credit underscores insurers’ quest for higher returns in a low-interest-rate environment. Private credit, involving non-bank lenders and middle-market companies, offers attractive yields but comes with heightened risks and less transparency. This trend signifies a pivotal change in investment strategies as insurers seek to balance risk and reward.

However, the report also highlights concerns about the long-term risks of these investments. As Swetha Ramachandran from Artemis Fund Managers notes, “Short-term spread volatility in public markets can overstate underlying credit trends,” making private credit a compelling alternative for insurers operating on a going concern basis.

What’s Next?

Expect insurers to ramp up their private credit holdings, particularly in private placements, asset-based financings, and commercial real estate loans. This move could lead to rising delinquencies and defaults as inflation and high interest rates push more borrowers towards private credit. While the short-term appeal is evident, the long-term implications could be significant.

Moody’s warns that mismanaging these assets and liabilities could be “highly credit negative.” Investors should monitor how insurers navigate these risks and manage their portfolios to ensure they capitalize on private credit’s potential without falling prey to its pitfalls.

In conclusion, insurers’ growing appetite for private credit presents a mixed bag of opportunities and challenges. As they seek higher returns, the balance between short-term gains and long-term stability will be crucial. Keep an eye on how this trend unfolds and its broader impact on the financial markets.

Source: Reuters
Tags: financial marketsGlobal insurersInvestment StrategyMoody's RatingsPrivate Credit
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© 2025 Lumida Wealth Management LLC is an SEC registered investment adviser. Privacy Policy. Cookies Policy.
Disclaimer Important Information This site is for informational purposes only. Information presented on this site does not constitute as investment advice.

Lumida Wealth Management LLC (‘Lumida”) is an SEC registered investment adviser. SEC registration does not constitute an endorsement of the firm by the Commission nor does it indicate that the adviser has attained a particular level of skill or ability.

Lumida's website (referred to herein as the "Website") is limited to the dissemination of general information pertaining to its advisory services, together with access to additional investment-related information, publications, and links. Accordingly, the publication of the Website on the Internet should not be construed by any client and/or prospective client Lumida’s solicitation to effect, or attempt to effect transactions in securities, or the rendering of personalized investment advice for compensation, over the Internet.

Any subsequent, direct communication by Lumida with a prospective client will be conducted by a representative that is either registered or qualifies for an exemption or exclusion from registration in the state where the prospective client resides.

‍Lead Capture Forms: By submitting your contact information in the forms on this site, you are not obligated to invest in Lumida's product or services.
‍Address: Lumida Wealth Management, 25 W 39th Street Suite 700, New York, NY 10018