Other reads worth your time this week.

What’s Going on in Private Credit? (Howard Marks)

The Rise Of Private Credit In Insurers' Investment Portfolios (S&P Global)

The life insurance business has transformed over the last two decades.

Following the global financial crisis, private equity began acquiring life insurers.

Today, these PE-backed platforms hold $1.4T in assets, growing at ~20% CAGR since 2014.

The foundation of this strategy is the fixed annuity business.

Why? Permanent capital.

Annuities collect capital upfront, which must be invested to fund future payments.

For private asset managers, this type of capital is the holy grail:

As a result, PE-backed platforms now account for roughly 35% of new U.S. fixed and fixed-indexed annuity sales.

The draw of annuities is simple: the spread.

Insurers earn the difference between what they make on investments and what they pay out to customers.

PE-backed platforms have leaned into this by shifting allocations from liquid, highly rated assets into higher-yielding private placements.

But how significant is this shift?

Private placements are a broad category of non-public fixed income, including investment-grade corporate debt, asset-backed securities (ABS), and other structured credit instruments.

Within this universe, insurers are also increasing exposure to privately originated and rated debt, otherwise known as private credit.

The most common forms include investment-grade CLO tranches and fund-level debt instruments.

However, this exposure remains relatively small.

S&P estimates that life insurers hold roughly $290B in private credit, or only ~6% of total investments.

Life insurers must hold capital reserves against their investments as a safety net.

The riskier the investment, the bigger the required reserve.

But a loophole has emerged.

Firms like Apollo/Athene and KKR/Global Atlantic have been shipping annuity liabilities offshore to related entities in Bermuda and the Caymans.

These jurisdictions have looser rules, which require less capital to be held in reserve.

The result: life insurers are more leveraged, and have a smaller safety net.

Since 2019, reserves ceded to offshore affiliates doubled to over $800B.

The biggest risk facing life insurers is confidence.

Limited transparency around private placements has left investors assuming the worst.

While the rise in illiquid allocations and reinsurance complexity is concerning, the underlying risk is limited at this point.

Most private placements are investment grade and publicly rated.

Even in a severe downturn, you would need massive, unheard of losses on the ~$290B of private credit (only 6% of total investments) to pose systemic risk.

The real vulnerability is sentiment.

Investors are already on edge from private credit headlines, which could easily start to weigh on confidence in the sector.

Thoughts on this week’s write-up? Anything I missed?

Just hit reply. I read every note.

The information contained herein should not be construed as legal, investment, accounting or other professional services advice on any subject. ILLIQUID INSIGHTS LLC, its affiliates, officers, directors, partners and employees expressly disclaim all liability in respect to actions taken or not taken based on any or all the contents of this publication. Furthermore, opinions expressed by participants herein are not the opinions of ILLIQUID INSIGHTS LLC. Copyright © 2026 ILLIQUID INSIGHTS LLC. All rights reserved.