The allocation in numbers
- 35% of US life insurers’ invested assets sat in private credit at year-end 2025, on $5.97tn of cash and investments (Moody’s Ratings).
- 20% for UK insurers and 11% in Europe. Property and casualty far lower — 8% US, 4% UK, 1% Europe (Moody’s Ratings).
- 42% of US and 36% of UK and European insurers intend to increase allocations over the next 12 to 18 months (Moody’s 2026 Insurance CFO survey).
- Infrastructure appetite 56% US, 70% UK and Europe; private asset-based finance 70% UK and Europe (same survey).
- $276.8bn of CLOs held by US insurers at year-end 2024 — 5.1% of bonds, double the 2018 level, 82% of it life (NAIC).
What happened
Tight credit spreads and high government bond yields did something counterintuitive in 2025: they slowed private credit’s growth while pushing insurers further into complexity for the premium that remained. Demand diverged by region: retail annuities in the US, bulk purchase annuities in the UK, and a continental Europe held back by the shift to capital-light unit-linked business, where the policyholder carries the investment risk.
The capital cost of annuity business is managed through offshore reinsurance and sidecars. Reliance on external managers has grown with it, and large US alternative managers have been buying or partnering with annuity writers — a pattern now appearing in the UK.
Where the risk moved
The headline allocation barely moved. What changed was what sat inside it.
Allocations were broadly stable through 2025. Within them, insurers kept reallocating toward assets that are more complex, less liquid and harder to value. Most holdings remain in established investment-grade classes — private placements, commercial and residential mortgages, infrastructure. The growth is at the margins: middle-market lending, private structured credit and below-investment-grade commercial real estate lending, each growing fast from a low base.
That is what a percentage cannot show. A portfolio reported at the same share two years running can carry materially different risk, and the shift runs away from where a price can be observed toward where it has to be constructed. The clearest complexity premium now sits in fund finance — another way of saying the market is paying for opacity.
What the authorities did
Four moves, and all four ask the same question: does the rating mean what it says.
The principles-based bond definition took effect on 1 January 2025, classifying assets by economic substance rather than legal form. From 1 January 2026 the Securities Valuation Office can review the rating on a filing-exempt security where it considers the rating does not reflect the risk, and a due diligence framework for rating providers is targeted for adoption this year. Capital is following: new risk-based capital factors for non-residual CLO and collateralised debt obligation tranches apply from year-end 2026 reporting, and a proposal would exclude multi-collateral structured credit with embedded asset-liability mismatch from the bond definition. Fourth, the related-party leg — Actuarial Guidelines 53 and 55 tightened cash flow testing and asset-intensive annuity reinsurance, and the Financial Analysis Handbook is being extended to private credit and related-party exposures. Bermuda’s 15 per cent corporate income tax sits alongside closer supervisory attention to life reinsurance asset strategies.
None of that is tax regulation. All of it is the same evidential standard.
The ajiho view
Two sets of regulators, with nothing in common, arrived at the same place this year.
Prudential supervisors concluded that a rating produced for one purpose does not necessarily measure the risk an insurer carries, and took the power to test it. Tax authorities reached that conclusion from the other side. The UK’s Finance Act 2026 codifies that financial transactions be priced reflecting group support, implicit and explicit. Australia’s TR 2025/2 and draft PCG 2025/D2 ask what a borrower could have raised unaided, and red-flag using a guarantee to raise more. Both say the same thing: produce the analysis, not the label.
In an intercompany file the borrower’s rating is the largest single input into the price, routinely set by notching from a parent or quoting a model output, then treated as settled. Both regimes have stopped accepting that in their own domains, and a tax authority reading the prudential debate will not find the argument hard to make.
The second consequence sits on the other side of the trade. The comparables a file reaches for are increasingly insurer-funded — set by a lender solving for duration, capital treatment and matching, carrying a complexity premium the insurer is capitalised to bear and a related-party borrower is not. Lifting them unadjusted imports the lender’s balance sheet into the borrower’s price.
Our call: credit analysis becomes the contested ground in financial transactions through 2027, ahead of the margin. Files that evidence a rating rather than assert one will hold; the rest are tested in Australia and the UK first, on the comparables second.
What this means for your business
- Evidence the rating, do not inherit it. A notched parent rating or a model output is a starting point, not a conclusion — and both sets of regulators now say so.
- Separate the lender’s premium from the borrower’s risk. Insurer-funded credit prices duration, capital treatment and complexity. Strip what the borrower does not bear before those terms become a comparable.
- Check what the comparable actually is. Private placements, fund finance and asset-based finance price on different logic from corporate lending, even at the same rating.
- Look at the related-party leg. Offshore reinsurance, sidecars and affiliated manager arrangements are where supervisory attention is going — and they are intercompany transactions first.
Sources
Moody’s Ratings, Private Credit — US and Europe: Insurers push further into private credit while credit risk rises at the margins, 17 September 2026, including Moody’s Global Investment Surveys and the 2026 Insurance CFO survey. NAIC, private credit issue brief and 2026 investment regulation workstreams, including the Invested Assets (E) Task Force. UK Finance Act 2026, Schedule 6. Australian Taxation Office, TR 2025/2 and PCG 2025/D2. OECD Transfer Pricing Guidelines, Chapter X. Allocation data as at year-end 2025; CLO data as at year-end 2024. No Moody’s charts or text reproduced.