US insurance regulators defend oversight of insurers’ growing private credit ties
The body representing US state insurance regulators has defended state oversight of the industry, following concerns about the risks posed by insurers’ growing ties to private investment firms and their exposure to private credit.
In its response to US Senator Elizabeth Warren, who raised the concerns earlier this month, the National Association of Insurance Commissioners (NAIC) said the state-based regulatory framework is evolving alongside insurers’ changing investment strategies, ownership structures and risk-transfer arrangements to address emerging risks.
“State insurance regulators continually evaluate whether the solvency framework appropriately captures emerging and changing risks,” NAIC leadership wrote in a response letter.
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The NAIC added that it has strengthened asset-adequacy testing and stepped up oversight of certain life insurance and annuity reinsurance.
It said it has also introduced a 45 per cent risk-based capital charge for residual interests in structured securities, and created a formal process to assess whether credit rating providers’ methodologies and rating mappings remain appropriate for regulatory purposes.
“Rather than relying on a static regulatory framework, regulators have regularly updated capital requirements, reporting standards, supervisory tools, and analytical capabilities to address emerging risks while maintaining a consistent focus on insurer solvency and policyholder protection,” NAIC leadership said.
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The responses comes as Warren wrote to the NAIC on 10 September warning of the growing risks posed by ties between private investment firms and insurance companies.
In the letter, she questioned what state and federal regulators were doing to protect American families’ investments, given Wall Street firms’ ties to life insurers in particular.
Insurers, particularly life insurers, have become an increasingly significant source of capital for the private credit industry. Their exposure to the asset class more than doubled over the past decade, from $386bn (£291.2bn) in 2014 to $849bn in 2024, according to Warren’s letter.
Read more: Asset owners increasing exposure to private markets
