Are European insurers underestimating the risks inside the private credit boom? According to Beinsure, the market keeps talking about yield, but gives less attention to liquidity, valuation opacity and stress behaviour.
EIOPA has warned European insurers expanding into private credit. The regulator pointed to risk management, governance and investment expertise as areas requiring stronger control.
Private credit has become one of the main investment themes for insurers. It’s also one of the least understood by boards, investment teams and, honestly, some external capital providers. The numbers explain the pull.
European insurers held €514 bn in private credit exposure at the end of 2024. That represented 5.1% of total insurer assets.
PE owns only 2.4% of the European insurance market overall. Yet in Greece, Luxembourg and Portugal, PE ownership already exceeds 15%.
New insurance rules expected next year might support even larger allocations to private assets. That would bring more capital into the sector, and more scrutiny.
Insurers have long-duration liabilities and strong balance sheets. Private credit offers higher yields, portfolio diversification, long-duration cash flows and lower correlation with public markets.
Does every insurer have the tools to manage liquidity risk? Valuation uncertainty? Structured exposures? Asset-liability matching? Credit deterioration during a downturn?
History rarely shows markets breaking only because investors chased yield. Markets break when investors misread risk, price it too cheaply and assume liquidity will still be there under pressure.
According to Beinsure, regulators now look more closely at the link between private credit, PE ownership, asset-intensive reinsurance and complex investment packaging.
In stable markets, these structures look efficient. Capital moves cleanly. Returns look measured. Risk reports look tidy enough.
During volatility, the real risk holder becomes harder to identify. That is where supervisors get nervous. Private credit is not automatically dangerous for insurers. Weak governance around private credit is.
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AUTHOR: Oleg Parashchak – CEO & Founder of Finance Media Holding
