Clearwater Analytics reports that life insurers are increasing private credit exposure by simultaneously investing in and lending to the same funds.
Approximately 25% of life insurers holding equity in private-credit funds also serve as lenders to those same vehicles. These insurers typically provide $2 in loans for every $1 of equity shares they own.
This practice creates cross-contamination risk by amplifying both potential investment returns and losses. The median insurer now allocates 9% of its total portfolio to private credit. Regulators are increasing scrutiny of the sector due to rising concentration and liquidity risks.