Global life insurance companies are facing increasing pressure to boost their allocations to private credit in order to generate higher profits, despite growing concerns about rising debt risks. According to a recent Goldman Sachs Asset Management survey of over 400 senior investment professionals in the insurance industry, 58% of insurers plan to increase their private credit allocations this year.
The shift towards private credit is driven by the search for higher returns, as publicly traded corporate bonds offer lower yields. Over the last decade, private credit has outperformed investment-grade corporate debt by approximately 6.5 percentage points annually, making it an attractive option for insurers looking to maximize their returns.
The trend reflects the broader challenges faced by life insurers in maintaining profitability in a competitive market. As risk in the debt market shows signs of rising, insurers are navigating a delicate balance between seeking higher yields and managing potential risks associated with increased exposure to private credit.
