European insurers chasing private credit returns need to understand the risks before they expand further, according to the European Insurance and Occupational Pensions Authority (EIOPA).
The region includes insurers of many sizes, and some still lack the expertise required for private credit investing.
Private credit has pulled more attention from European insurers and pension funds as banks retreat from some lending activities. Post-2008 financial crisis rules pushed banks away from parts of the financing market, leaving space for long-term investors with large balance sheets.
Insurers have stepped into that gap because their financial position remains strong and their liabilities often stretch over long periods. That structure gives them room to hold less liquid assets and target higher returns.
The shift also helps insurers diversify investment portfolios beyond public bonds and listed credit. New insurance rules due next year should allow further allocations to these asset classes. Regulators still want to protect trust in the sector if weaker firms take losses they don’t fully understand.
If the markets become volatile, and they tend to do that these days, we want to make sure that assets and liabilities move in a matched way.
Petra Hielkema, chair of the European Insurance and Occupational Pensions Authority
European insurers held €514bn, or $597bn, of private credit exposure at the end of 2024, according to EIOPA. That represented 5.1% of their total assets.
Most of that exposure sits in real estate and mortgages rather than direct loans to software companies. Technology lending has drawn more investor concern because artificial intelligence disruption threatens some business models and revenue assumptions.
The bigger concern sits in more complex investment packaging, especially at insurers owned by private equity firms. Those structures appear more often in the U.S. market, according to Hielkema.
European Union liabilities often run longer, so insurers need a clear view of time horizons, liquidity risk, and credit risk before they commit capital.
Buyout firms have shown growing interest in insurers because insurance balance sheets offer steady cash for investment strategies. Private equity owns only 2.4% of the European insurance market, according to EIOPA, although ownership exceeds 15% in Greece, Luxembourg, and Portugal.
EIOPA started a consultation in February on a supervisory statement covering authorization and oversight of private equity ownership of insurers. The watchdog also works on a statement covering asset-intensive reinsurance.
According to Beinsure analysts, the warning targets a familiar tension in insurance investing. Private credit offers yield, diversification, and longer-duration assets, but those benefits weaken quickly when valuation opacity, liquidity mismatch, or structured exposure hides the real risk holder.
For insurers, the supervisory question isn’t whether private credit fits the balance sheet. It is whether the firm has the models, governance, and asset-liability discipline to hold it through stress.
