Insurers still favor private credit despite growing risk caution

Marsh's 2026 Global Insurance Investments Survey, released Tuesday, shows insurers remain keen on private credit even as they grow more cautious about the risks. The survey of 123 insurers across 24 countries, representing more than $4 trillion in investment assets, found that 57% of respondents expect to increase their private credit allocations over the next 12 to 24 months. That is up sharply from 32% in the 2024 survey from Mercer and Oliver Wyman. Public investment-grade fixed income was the top pick for 48% of respondents, down from 37% two years ago.

North American insurers are leading the charge. About 74% of Canadian respondents and 65% of U.S. insurers said they plan to raise private credit exposure, compared with 51% in Europe and 46% in the UK. Larger firms are driving most of the growth: 81% of insurers with more than $25 billion in assets under management intend to increase allocations, versus 46% of those below that threshold. Life insurers showed the strongest appetite, with 73% planning to add exposure, followed by health insurers at 56% and property and casualty insurers at 40%.

The enthusiasm is tempered. The most common concern, cited by 66% of respondents, was the narrowing of illiquidity premiums and tighter credit spreads – a sign that investors may not be getting paid enough for locking up capital. Weaker underwriting standards or loan covenants worried 54%, while 51% flagged rising defaults, widening spreads and greater use of payment-in-kind structures.

"Private credit is a compelling opportunity for insurers, especially in the asset-backed space," said David Morrow, Mercer's Global Insurance Proposition Leader. "Insurers can diversify away from corporate risk while realising meaningful yield pickup over similar rated, investment-grade public market bonds."