Insurance Giants Embrace Private Markets Boom

What's New

According to S&P Global Market Intelligence's 2025 US Insurance Investments Market Report, life insurers accelerated their shift toward alternative investments in 2024, with other long-term invested assets and mortgage loans each gaining portfolio share for the fourth consecutive year. The trend reflects insurers' growing willingness to trade liquidity for yield in pursuit of higher returns, particularly through partnerships with alternative asset managers specializing in private credit origination.

Why It Matters

This pivot represents a fundamental transformation in how insurers manage their $8.1 trillion in combined assets, moving away from traditional public markets toward illiquid alternatives that offer premium yields but carry complexity and credit risks. The shift could reshape insurance industry profitability while raising regulatory scrutiny over concentration risk and capital adequacy.

Big Picture Drivers

• Rate environment: Federal Reserve's peak 5.50% policy rate through September 2024 created attractive reinvestment opportunities in higher-yielding private assets

• Asset-liability matching: Life insurers' long-duration liabilities align well with illiquid private investments, unlike P&C insurers who need liquidity for claims

• Manager partnerships: Alternative asset managers are taking non-controlling stakes in insurers while winning asset management mandates, creating symbiotic relationships

• Regulatory flexibility: NAIC's interim guidance allows negative interest maintenance reserves, providing temporary relief for reinvestment strategies

• Yield premium: Private investments consistently deliver spreads above public market equivalents, critical for meeting policyholder obligations

By The Numbers

• 21.6% of life insurer bond portfolios consist of truly private securities versus just 2.8% for P&C insurers

• $775.71 billion in life insurer mortgage investments, up 4.8% year-over-year to nearly 14.7% of unaffiliated investments

• 45.4% of Schedule BA alternative investments show some degree of related-party relationships, up from previous years

• $14.87 billion in residual interest holdings by life insurers, surging 27.3% as insurers embrace equity tranches of structured deals

Key Trends to Watch

• Private credit expansion continues as life insurers partner with asset managers to originate loans directly, bypassing traditional banking channels while capturing origination premiums.

• Residential mortgage surge shows life insurers rotating into single-family loans, with residential mortgages comprising 36.6% of new whole-loan acquisitions in 2024.

• Related-party scrutiny intensifies as regulators examine private equity-owned insurers' affiliated investments and potential conflicts of interest in fee structures.

• Commercial real estate stress emerges with office mortgage maturities peaking in 2025 while credit quality metrics show continued deterioration across property types.

The Wrap

The insurance industry's embrace of private markets reflects both opportunity and necessity as traditional yields remain insufficient for long-term obligations. While this strategy has delivered strong returns during economic resilience, the concentration of illiquid, complex assets creates unprecedented risk exposure that regulators and industry leaders must carefully monitor as market conditions evolve.