US state insurance regulators are tightening oversight of private credit, private equity ownership and complex insurer investments as life companies increase exposure to less-liquid and privately originated assets.
In a September 24 response to the US Senate Banking Committee, the National Association of Insurance Commissioners said regulators have spent years adapting solvency rules to changing investment strategies, ownership structures and reinsurance arrangements.
The NAIC said regulatory treatment depends on economic risk rather than whether an insurer is owned by private equity or invests in private credit.
The shift partly developed during the prolonged period of low interest rates after the financial crisis. Life insurers sought additional yield through assets carrying greater illiquidity or structural complexity, while alternative asset managers expanded their involvement in the sector. The NAIC said those arrangements remain subject to the same state solvency requirements as other insurance businesses.
Private credit has become one of the main areas of regulatory attention.
The NAIC estimates about 13% of insurer invested assets fall within a broad definition of private credit, while newer forms receiving greater scrutiny represent less than 6%. Life insurers also held more than $500 bn of traditional private placement bonds at year-end 2025.
Regulators are trying to distinguish long-established private placements from newer structured, privately rated or affiliated assets that present greater challenges around valuation, liquidity and transparency.
One major change took effect on January 1, 2025 through the principles-based bond definition. Investments now need to qualify as bonds based on their economic characteristics rather than legal structure alone. Securities that fail the test must be reported separately and either undergo NAIC risk assessment or receive a higher default risk-based capital charge.
The NAIC has also expanded its ability to challenge external ratings used for regulatory purposes. Its Securities Valuation Office can investigate cases where a rating appears inconsistent with the underlying investment risk, while private letter ratings now require supporting information explaining methodology, assumptions and risk analysis.
A separate Credit Rating Provider Due Diligence Framework is being developed to examine rating methodologies and performance more systematically.
Possible regulatory responses include additional testing, changes to rating mappings, removal of filing-exempt treatment or restrictions on the use of a rating provider.
Private investments will also face more detailed disclosure from year-end 2026. Insurers will report how private assets were distributed, their book and fair values, reliance on Level 2 or Level 3 valuation inputs, deferred payment-in-kind interest and use of private letter ratings.
Related-party transactions are receiving more attention as well. Insurers must disclose cases where affiliated or related firms participate in asset origination, management, servicing or investment selection. Regulators are also examining investment-management agreements for conflicts of interest, fees, authority over investment decisions and the insurer’s ability to oversee affiliated managers.
Capital requirements are being revised alongside reporting rules. State regulators adopted a 45% risk-based capital charge for residual interests in structured securities and revised capital factors for certain lower-rated CLO tranches effective at year-end 2026.
Asset-intensive life reinsurance is another priority, particularly transactions involving offshore affiliates or reinsurers outside the same US actuarial reporting framework.
Actuarial Guideline 55 requires regulators to assess the ceding insurer and reinsurer as one economic system when reviewing certain transactions. The analysis covers investment performance, asset quality, liquidity, defaults and whether sufficient assets and capital remain after reinsurance. The first AG 55 filings were submitted in 2026.
Actuarial Guideline 53 separately examines whether complex or high-yield assets supporting long-duration insurance liabilities can generate sufficient cash under adverse conditions.
For the 2026 review cycle, regulators are focusing on structured-asset cliff risk, illiquidity and Level 3 valuation exposure.
The NAIC said it doesn’t support a separate solvency regime solely for private equity-owned insurers. Instead, regulators focus on concentration, valuation, conflicts of interest, leverage, reinsurance exposure and whether insurers maintain adequate capital and reserves.
The organization also said it isn’t aware of any material case in which a private firm invested policyholder premiums in risky assets while failing to disclose or properly classify those investments.
Pension risk transfer adds another area of exposure. At year-end 2025, 39 life insurers reported about $409 bn of pension risk transfer group annuity business, up from approximately $395 bn a year earlier. The NAIC said regulators continue to monitor the assets supporting those obligations.
State regulators are also increasing coordination with federal agencies.
Insurance commissioners and NAIC representatives met Treasury officials in May 2026 to discuss private credit, with subsequent discussions covering risk-based capital, private ratings and offshore reinsurance.
The direction of regulation is increasingly clear: private investment isn’t being treated as a separate risk category, but complex assets, affiliated managers and offshore reinsurance structures are receiving deeper scrutiny. Regulators are demanding more transparency, stronger capital treatment and better evidence that insurers understand the risks supporting long-term policyholder obligations.
