Moody’s: Insurance companies increasing exposure to private credit

Insurance companies in EMEA and the US are increasing their exposure to private credit assets and this is likely to continue to grow, according to two new reports by Moody’s Ratings.

Private credit investments by European insurers grew by around 4 per cent in 2024, with the industry holding around €500bn (£426bn) in private credit by the end of the year, representing around 13 per cent of total investment portfolios, Moody’s said.

Read more: S&P: Regulatory scrutiny of private markets will support their growth

Private credit allocations are currently higher in the UK than in continental Europe, averaging 18 per cent of total investments, but reaching up to 45 per cent for some insurers.

Meanwhile, Moody’s said the pace of expansion into private credit is even faster in the US than in Europe, with life insurers in the US having increased their allocation to private credit to about one-third of the sector’s $6tn (£4.4tn) in assets.

Read more: Retail investors will drive 50pc of private market flows by 2027

Around 80pc of respondents to a survey by Moody’s said they are planning to increase their holdings of at least one class of private credit over the long term, with growth appetite being strongest in higher spread asset-based finance and private placement.

“We expect insurers with comparatively low exposure, including some large European groups, to increase their allocations the most,” said Will Keen-Tomlinson, the author of the European report.

Read more: Moody’s warns of risks in alternative asset managers turning to retail

“For most insurers, the benefits of investing in private credit assets will outweigh the risks.”