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Last updated: 7/24/2026

Private credit is debt or debt-like financing that is not issued or traded in public markets but instead negotiated directly between borrowers and investors. The direct nature of the transaction allows for terms and conditions to be negotiated to meet the specific needs and objectives of the individual borrower as well as the lender.

However, the customized nature of these investments results in a lack of a robust secondary market and, therefore, less liquidity compared with public debt. Accordingly, investors are compensated higher spreads and yields relative to public debt with otherwise similar characteristics. In addition, due to a lack of transparency and infrequent valuations, private credit is more difficult to price than public debt.

As banks tightened lending standards following the 2008 financial crisis and subsequent changes in regulatory capital requirements, middle-market firms—and, increasingly, larger corporations—turned to private credit as an alternative source of debt capital. Assets under management have grown rapidly since then. , in 2023, the private credit market reached an estimated $1.8 trillion. Life insurers are a major participant in private credit lending, as long-dated private credit matches well with the duration of life insurers’ long-term liabilities – future claims. These trends are expected to continue. For example, that the private credit (debt) market will reach $2.6 trillion by 2029, while $4.5 trillion by 2030.

In addition to illiquidity, pricing difficulties, and lack of transparency, there are additional risks that can potentially arise as private credit lending continues to grow and evolve in the coming years. With the entry of other market participants focused on integrating alternative assets into private credit lending, it is possible that the nature and risks of private credit will change. It may transition to include transactions that are more esoteric, have lower credit quality, or perhaps are structured differently than previously seen (i.e., asset-based lending).

While private credit has generated attractive returns due to higher risk-adjusted yields, recent developments have underscored that these risks are no longer merely theoretical. In recent months, investor concerns about private credit valuations, transparency, underwriting discipline, and sector exposures have contributed to at some retail-oriented private credit vehicles, causing several funds to rely on withdrawal limits. Heightened scrutiny has been applied to software company borrowers who are especially exposed . These developments do not necessarily imply broad deterioration across the private credit market, or across insurers’ private credit holdings specifically. However, they highlight the importance of continued monitoring of credit quality and valuation practices.

State insurance regulators and 91���� staff, including the Capital Markets Bureau and the Securities Valuation Office are monitoring insurer investments in private credit and updating regulatory frameworks in response to these investment shifts. This task is primarily under the purview of the Financial Condition (E) Committee and relevant task forces and working groups. In 2024, the E Committee adopted an updated Holistic Investment Framework to better respond to these and other investment issues. In 2025, the Valuation of Securities (E) Task Force adopted a number of amendments to the Purposes and Procedures Manual of the 91���� Investment Analysis Office (P&P Manual). These include amendments which improve the transparency of private-credit investments such as requiring the filing of Private Rating Letter Rationale Reports within 90 days of the Annual Update or a Rating Change and requiring that these reports “possess analytical substance”. Beginning in 2026, the Valuation of Securities (E) Task Force was restructured into four groups: Invested Assets (E) Task Force; Investment Analysis (E) Working Group, Investment Designation Analysis (E) Working Group, and Credit Rating Provider (E) Working Group.

The Statutory Accounting Principles (E) Working Group has adopted changes to annual financial filings effective for year-end 2026 to improve the reporting of private credit holdings by insurers. Additionally, other 91���� groups continue to develop additional guidance and processes for monitoring the private credit exposures of insurers through conducting ongoing solvency monitoring activities and updating related 91���� handbooks and guidance.