Insurance companies and large financial institutions are getting ready to put more money into private credit markets, according to a recent survey — even as high-net-worth investors pull back over concerns about being locked into illiquid investments and regulators take a closer look at the industry’s expanding ties to insurance balance sheets.
Private credit markets have been relatively quiet over the past several weeks following a wave of investor withdrawal requests. But the latest developments suggest the sector may be moving toward investors who are more comfortable with long-term commitments and away from those who have less tolerance for limited exit options.
Insurers remain eager to put money to work. A Marsh survey found that 57% of insurers plan to grow their private credit exposure over the next 12 to 24 months. That figure rises to 81% among firms managing more than $25 billion in assets, and 73% among life insurers specifically.
Alternative asset manager Blackstone reported that withdrawal requests at its flagship private credit fund dropped significantly in the early part of the third quarter. That followed a period in which investors tried to redeem 10% of shares during the second quarter — though the fund only repurchased 5%, which is its standard quarterly cap.
Concerns about private credit’s exposure to artificial intelligence-related risks have not stopped money managers from pulling in capital from a variety of sources. Blackstone brought in nearly $70 billion across its businesses during the quarter. Institutional clients kept allocating to private credit even while fundraising from wealthy individual investors stayed subdued.
The Marsh survey revealed that insurers are increasingly interested in investment-grade direct lending, private placements, asset-based finance, and structured credit — not just loans tied to private-equity-backed companies. However, about two-thirds of those surveyed expressed concern over shrinking premiums for locking up funds and tighter spreads. More than half flagged weaker underwriting standards or loan covenants as a worry.
That puts private credit in a position of having plenty of capital available but facing a tougher challenge: demonstrating that private loans still offer enough additional return to justify the risks of illiquidity and uncertain valuations.
Secondary markets for private credit — which give investors a way to exit their positions — are expanding. GCM Grosvenor raised $1.2 billion for its first dedicated strategy in this space, while Ares raised $7.1 billion for its debut private credit secondaries fund. This growth reflects a broader trend in which investors can acquire established portfolios from others seeking cash, looking to rebalance, or simply tired of long holding periods — including high-net-worth individuals.
Established lenders are also continuing to put money to work. Apollo Debt Solutions BDC originated roughly $1.3 billion in private debt investments during the second quarter, nearly all of it in first-lien loans. Ares Capital refinanced approximately $709 million in direct-lending debt through a collateralized loan obligation.
The growing involvement of insurers in private credit is also catching the attention of regulators. Europe’s insurance watchdog is examining private equity ownership, affiliated investments, and reinsurance structures that could move risk between insurers and related asset managers.
