Insurers’ investments: An emerging risk to credit
At its core, insurance is a simple business: collect premiums, invest the funds, and pay claims. Three key risk points in this business model are well known to financial institutions:
- Affordability: Rising premiums strain cash flow for small businesses or tenants that have borrowed from a financial institution. The strain can force these borrowers to choose between paying bills or maintaining insurance coverage on the collateral securing a loan.
- Coverage gaps: Higher deductibles or new exclusions can make it difficult for insureds to return property to operational status after a loss, leaving repayment at risk.
- Dropped policies: Some insureds or insurers may cancel coverage entirely, the latter even across entire states or regions, posing risk to lenders with insured collateral.
Growing private market investments among insurers
A fourth credit risk related to insurance, however, is a “gray rhino,” the kind of problem that’s right in front of you, but you don’t see it). It’s the changing nature of insurance companies’ investment portfolios.
Like financial institutions, insurers must manage liquidity to meet claims. Unlike banks and credit unions, insurance companies have far more latitude in their investment choices. Increasingly, they’re reaching for yield through private credit and private equity, either directly or via funds.
Private credit investments account for more than 35% of total U.S. insurers’ investments, according to a Nov. 14, 2025, Financial Times article. In addition, private equity investors own 139 insurers as of mid-2025, according to the National Association of Insurance Commissioners (NAIC) Capital Markets Bureau. These investments account for 7.8% of insurers’ total assets in the U.S. While still small, the number is growing.
