Insurers plan to buy more private credit; the headroom is European

Moody's has put a number on the institutional tailwind that private credit managers have been underwriting to in their own fundraising, and the survey, covered by Alternative Credit Investor, finds 42 per cent of US insurers and 36 per cent of UK and European insurers plan to increase allocations to the asset class. For managers who have spent years answering investor questions about the durability of that demand, the answer now has an address on the insurance balance sheet.

At the end of 2025, private credit accounted for an estimated 35 per cent of US life insurers' investments, around 20 per cent for UK insurers and about 11 per cent for European insurers. The 42 per cent figure covers the US insurance sector rather than life books alone, so the two are not strictly comparable, but they point the same way: an American life balance sheet already running a third of its assets in private credit is a mature allocation, and what follows is more likely to be top-ups and shifts inside the book than a new wave.

Europe is where the arithmetic leaves room. An 11 per cent allocation set against an American 35 per cent is a gap that does not close in one vintage, and the 36 per cent of UK and European insurers who say they will add exposure are the buyers who would have to keep adding for years to move it. Three numbers together make the durable half of the tailwind European; the American half is increasingly a share fight among managers who are already approved.

What those incremental dollars buy is changing, and the change is what managers should be pricing. Moody's says insurers are broadening out from the private placements and mortgages that dominate their existing holdings into asset-based finance, fund finance, direct lending and private structured credit. Fund finance is the fastest-growing segment across most markets, while infrastructure and asset-based finance draw the strongest stated interest for future allocations.

The same survey tracks movement down the credit spectrum into middle-market lending, private structured credit, and more speculative below-investment-grade commercial real estate and infrastructure debt. Moody's notes that most of what insurers hold today — private placements, commercial and residential mortgages, infrastructure — is typically investment grade, and that the riskier segments are growing rapidly from a low base. A book tilting toward structured and asset-based exposure is a book whose returns depend on collateral selection and servicing, which suggests the binding constraint on growth is origination capacity rather than capital.

Moody's draws one consequence that cuts straight at the manager business: as insurers lean harder on external asset managers, manager selection and oversight becomes a more important source of investment risk — a warning to insurers and a to-do list for managers, since the dynamic is the same from both ends. Allocators have only so much shelf space, and the survey supplies one reason the tolls keep rising: every incremental dollar arriving in a segment an insurer does not underwrite in-house must be intermediated by a manager that insurer has already vetted, and the field of managers it can vet for fund finance and structured credit is almost certainly narrower than the field it can vet for senior direct lending.

The US has already produced an answer through ownership: large alternative asset managers there have increasingly partnered with or acquired annuity writers, a pattern Moody's says is beginning to emerge in the UK as well. Ownership converts manager-selection risk into internal allocation, which is why the survey's governance warning reads as a competitive argument for the largest platforms rather than a reason to slow down. Managers who cannot buy a balance sheet will keep renting access to one.

Moody's is explicit about the costs — greater illiquidity, valuation risk, credit risk — and its judgment is that the trend will not materially weaken the creditworthiness of most rated insurers, qualified by current exposure levels and generally strong asset-liability management. Exposure levels keep that judgment intact, and allocation growth erodes them, so the burden shifts to asset-liability management that has to absorb middle-market, structured and below-investment-grade real estate credit as those segments grow faster than the book around them.

The survey attaches its only hard dollar figure to a new segment: US insurers hold an estimated $15bn to $20bn of data centre exposure, with AI-driven demand for computing power and the energy infrastructure behind it opening an allocation channel insurers are only beginning to price. As this publication has argued, AI infrastructure has become a permanent private credit sector; if that holds, the data-centre number is a starting position for the insurance industry, and the managers underwriting compute and power assets have an allocator base whose stated direction is up.

The European figure is the one that sizes the prize. Eleven per cent climbing toward 20 and then toward the American 35 is a build that takes years and will run into origination desks before it runs into capital; 11 per cent drifting while the US 42 per cent resolves into reshuffling inside a book that is already a third private credit is a share fight among managers those insurers have already approved.