The German insurance industry is likely to continue increase its exposure to private credit, as the country’s growing investment needs require vast amounts of private capital.

An analysis by credit rating agency Moody’s argues that higher yields, diversification and long-duration assets will continue to support German insurers’ illiquid portfolio strategies.

Moody’s estimates that, in 2025, German insurers’ illiquid assets grew to 19.4 per cent, from 15.8 per cent in 2019. Most of the increase is due to life insurers seeking to honour guaranteed rates of return on savings products, with mortgages and loans accounting for the largest share of insurers’ illiquid portfolios. Meanwhile, exposure to infrastructure, private equity and alternative funds grew the fastest.

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The growing role of private credit in German insurers’ illiquid portfolios is also visible, with the asset class accounting for around 9.3 per cent of German insurers’ total invested assets at the end of 2024, compared to a European average of 7.5 per cent. This is consistent with a general trend among insurers in the US, UK and Europe.

However, growing private credit exposure makes valuation, liquidity and governance oversight also more complex. For instance, Moody’s points out that German regulator BaFin has increased its scrutiny of insurers with significant private asset exposure. The credit rating agencie also says the ability to manage complex portfolios will become a more important credit differentiator.

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Still, Moody’s believes German insurers’ credit strength is set to remain steady, supported by generally stable liability profiles, strong asset-liability management and a focus on established private credit asset classes. Insurers are also expected to help meet Germany’s growing investment needs across infrastructure, defense and digitalization, which are likely to require increasing amounts of private capital.