Private credit leads insurer growth plans despite tighter spreads

Demand is concentrated at the top end: 81% of insurers with more than $25bn in assets plan to increase allocations, against 46% of those below that size. By region, 74% of Canadian and 65% of US insurers plan increases, compared with 51% in Europe and 46% in the UK. Life insurers, at 73%, were more likely to allocate than health insurers at 56% and property and casualty insurers at 40%.

The other cautions were deteriorating underwriting standards or covenants, at 54%, and rising defaults, spreads or payment-in-kind structures, at 51%. Only 30% report having most of the private-markets capabilities they need to invest with confidence, and 29% only some.

That combination points to insurers still adding private credit despite weaker compensation, rather than because valuation concerns have eased. The appetite is concentrated in the cohorts with the strongest structural fit for private assets — the largest insurers, North American carriers and life companies. The capability gap points to external managers staying central to how insurers deploy into the asset class.

Sources: mercer.com