Managing risk is critical as private credit holdings increase

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      <subfield code="a">Principal takeaways -- Increasing over 6% in 2024 -- Rising allocations and illiquid assets -- Steady shift to non-MBS -- Private letter ratings impact on credit quality -- Concentration risks relative to capital and surplus</subfield>
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      <subfield code="a">The report explores the growing trend of private credit investments among life and annuity insurers, whose holdings have more than doubled over the past decade while publicly traded investments remained flat. In 2024 alone, private placements grew over 6%, with non-144a bonds more illiquid and opaque reaching $950 billion and accounting for a significant portion of insurers' portfolios. The report highlights a shift from traditional issuer obligations to structured non-mortgage-backed securities (non-MBS), including middle market CLOs and esoteric asset-backed instruments. It also examines the role of private letter ratings (PLRs), which are less transparent but often associated with higher credit quality. As exposure to below investment grade private credit grows, the report emphasizes the importance of robust risk management, due diligence, and liquidity stress testing to safeguard insurers' financial stability</subfield>
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