Insurers Are Buying Up Private Credit Debt

New research shows the American life insurance and private credit industries becoming intertwined.

That’s according to a report Wednesday (Nov. 12) by The Wall Street Journal (WSJ), citing research from Moody’s Ratings.

It shows that the boom in private credit (PC), which covers things like real estate debt, corporate loans and complex asset-backed securities, is quickly transforming the type of investments made by life insurance companies in the U.S.

Some of these firms, the report said, are putting more than half the fixed-income assets required to cover policies and annuities in difficult-to-trade debt.

Illiquid investments accounted for nearly a fifth of the $3.8 trillion in fixed-income investments held by insurance companies at the end last year, the report said. The pace of purchases appears to be picking up, with less-liquid private debt accounting for about 23% of the $522 billion of bonds insurance companies purchased in the first half of 2025, the research found.

The insurance sector’s holdings are “unusually concentrated,” the report added, with just 10 insurers controlling about 43% of the illiquid assets held at the close of 2024. This debt rarely trades, WSJ added, but that’s less of a problem in the insurance space, as companies typically buy and hold investments in the long term to balance assets and liabilities.

However, “during market stress insurers may be forced to sell at unfavorable prices, leading to realized losses and earnings volatility,” Moody’s said.

The debt is tougher to trade and much of it comes from weaker borrowers. About 10% had junk credit ratings, while 41% of illiquid investments with investment-grade credit ratings, had Baa ratings, the lowest level next to junk.

As PYMNTS wrote earlier this year, the fortunes of banks, platforms and PC firms are increasingly intertwined.

Research from the Boston Fed shows that banks have been increasing their exposure to non-bank financial institutions (NBFI), a category that includes PC and private equity (PE).

The central bank argues that “understanding the scale and complexity of bank-NBFI connections is important for identifying potential risks to financial stability — that is, the financial system’s ability to continue supplying capital to the economy if strained by shocks.” The PE and PC companies, in turn, put money to work in the economy.

But as the Fed report details, when these firms suffer a shock, “they tend to draw down their bank lines of credit at a faster rate than firms with only bank credit. This creates a channel through which PC funds may increase banks’ credit and liquidity risks, on balance.”