Private credit allocations are set to increase further among insurers in the US, UK and Europe, according to Moody’s.

The ratings agency found that 42 per cent of US insurers and 36 per cent of UK and European insurers plan to increase their exposure to the asset class.

At the end of 2025, private credit accounted for an estimated 35 per cent of US life insurers’ investments, compared with around 20 per cent in the UK and 11 per cent in Europe.

Moody’s said insurers are also broadening their private credit exposure beyond traditional private placements and mortgages into areas such as asset-based finance, fund finance, direct lending and private structured credit.

Read more: Private credit exposure set to rise in DC pensions

Fund finance is currently the fastest-growing segment across most markets, while infrastructure and asset-based finance are among the areas attracting the strongest interest for future allocations.

Moody’s also said insurers are moving into riskier areas of the market, including middle-market lending, private structured credit and more speculative commercial real estate and infrastructure debt.

“Most of insurers’ private credit investments are in established asset classes such as private placements, commercial and residential mortgages and infrastructure, which are typically investment grade. However, exposure to riskier and more complex segments, including middle market lending and private structured credit, is growing rapidly from a low base,” the report said.

“Insurers are also increasing their exposure to more speculative, below-investment grade classes of commercial real estate
lending and infrastructure.”

Reliance on external asset managers is also increasing, making manager selection and oversight a more important source of investment risk. In the US, large alternative asset managers have increasingly partnered with or acquired annuity writers, a trend Moody’s said is beginning to emerge in the UK.

Read more: Asset owners increasing exposure to private markets

The growth of artificial intelligence is also creating opportunities for insurers through rising demand for data centres and the energy infrastructure needed to support them.

Moody’s estimated that the US insurance sector currently has around $15bn to $20bn (£11bn to £15bn) of exposure to data centres.

However, the ratings agency warned that increasing allocations to private credit bring greater illiquidity, valuation and credit risks.

Despite this, Moody’s said it does not expect the trend to materially weaken the creditworthiness of most rated insurers, given current exposure levels and generally strong asset-liability management practices.