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Private credit reaches 48.4% of US life insurer bonds after NAIC rules
NAIC rules effective January 1, 2025 pushed insurers to reclassify assets by economic substance, moving about $15.40 billion and shifting bond allocations.
Private credit has become a dominant part of US life insurers' bond holdings, reaching 48.4% of total life industry bonds at year-end 2025, up from 37.4% five years earlier, according to S&P Global Market Intelligence. The growing concentration has prompted a regulatory overhaul by the National Association of Insurance Commissioners, focused on how investment risk is tracked and disclosed.
The NAIC’s Principles-Based Bond Definition, effective January 1, 2025, requires insurers to classify assets based on economic substance rather than legal form. The goal is to prevent structured instruments from receiving bond capital treatment the NAIC says they do not merit, and the implementation has produced uneven reallocations across portfolios.
In general accounts, life insurers transferred nearly $15.40 billion in assets from Schedule D, Part 1 to other investment schedules, with Lincoln National Corp. accounting for more than one-quarter of those transfers, the report said. On the property and casualty side, roughly 650 bonds valued at $1.81 billion shifted to other schedules.
The updated Schedule D breaks the nearly $4 trillion US life general account bond book into issuer credit obligations and asset-backed securities, settling at 72.8% and 27.2% respectively, with corporate bonds dominating issuer credit obligations at 74.1%. The NAIC said transparency remains a top priority for 2026, and the report also notes regulators plan to examine growth in residential mortgage loans, while life general account bond allocations fell to 66.8% from 67.4% year over year as carriers moved toward higher-yielding alternatives.