Private Credit and Insurance Regulation
How State Regulators Oversee Private Credit
Quick Takeaways:
- Private credit includes investments such as private placements, direct lending, privately rated securities, structured securities, and private credit funds.
- State insurance regulators oversee insurer investments to help protect policyholders.
- Regulators focus on whether these investments are transparent, properly valued, and supported by appropriate capital.
- The NAIC gives state regulators shared tools, data, analysis, and public forums to support consistent oversight. State regulators make decisions involving private credit.
What Is Private Credit?
Private credit generally means debt investments that are not publicly issued or traded. These can include private placement bonds, direct lending, bank loans, privately rated bonds, asset-backed securities, collateralized loan obligations, and private credit funds.
Insurers may use private credit to diversify their portfolios and help match long-term obligations. Some private credit investments, however, can be harder to value, less liquid, or more complex than traditional public bonds. Regulators review these investments to confirm they are reported accurately, valued appropriately, and managed in a way that protects policyholders.
Regulatory Actions Strengthening Oversight
Explore key regulatory actions taken in recent years and how each initiative has strengthened oversight of insurer investments and private credit.
2021
Private Rating Rationale Reports - Improved transparency into private letter ratings by requiring supporting rationale reports that explain the investment transaction, rating methodology, and credit analysis.
2021
Risk-Based Capital Bond Factors Revised - Updated bond capital factors to better align capital requirements with credit risk and market developments.
2021
Principle-Based Bond Project Initiated - Launched work to modernize bond definitions and treatment so assets receive accounting and capital treatment based on their substance and risk.
2022
Structured Securities RBC Project Initiated - Began modernizing capital treatment for complex structured products, including investments with features that may overlap with private credit exposure.
2022
Regulatory Considerations for Private Equity-Owned Insurers Adopted - Provided regulators with supervisory considerations related to governance, affiliated asset managers, complex investments, and ownership structures.
2023
Investment Oversight Modernization Framework Initiated - Established a broader framework to strengthen review of insurer investments as asset structures evolve.
2023
Actuarial Guideline LIII for Complex Assets - Supported consistent valuation and reserving review for complex assets used in life insurance reserve asset adequacy testing.
2024
Discretion Procedures for NAIC Designations - Authorized regulators to challenge or override NAIC Designations assigned through the filing exemption process when rating-based designations do not reasonably reflect risk.
2025
Principles for Risk-Based Capital Adopted - Adopted core principles to guide future RBC updates and keep the framework risk-sensitive, transparent, and adaptable.
2025
RBC Model Governance and Update Initiative - Launched a governance effort to improve transparency and consistency in how RBC models are maintained and updated.
2025
Actuarial Guideline 55 for Assets Supporting Reinsurance - Established consistent regulatory valuation treatment for reserves and assets supporting reinsurance arrangements, including structures that may involve complex or less transparent assets.
2025
Investment Oversight Reorganization - Created the Invested Assets Task Force and specialized working groups focused on investment analysis, investment designations, and credit rating provider due diligence.
2025-2026
Expanded Statutory Reporting for Private Placements and Complex Investments - Adopted enhanced disclosures, effective with 2026 reporting, to give regulators better visibility into private placements and complex investment structures.
How State Regulators Oversee Insurer Use of Credit Ratings
State insurance regulators oversee private credit through financial reporting, investment review, valuation analysis, risk-based capital, reserve testing, holding company oversight, and financial exams. These tools help regulators assess individual investments, company-level risk, group-level exposure, and market trends.
This work helps oversight keep pace with changing markets while staying focused on solvency and policyholder protection.
Current Regulatory Priorities
Credit Rating Oversight
Regulators are reviewing how public and private ratings are used in the NAIC investment process and developing ways to evaluate rating providers.
Structured Securities
Regulators are updating capital treatment for complex investments, including collateralized loan obligations and similar assets.
Investment Oversight Modernization
The NAIC is updating investment review processes as asset structures and risks evolve.
Private Placement Reporting
New reporting fields and disclosures will give regulators better visibility into private placements and other privately distributed investments.
Valuation and Disclosure
The Investment Analysis Working Group is focused on assets that may be difficult to price or compare.
Reinsurance and Affiliated Structures
Regulators are reviewing how reinsurance, affiliated asset managers, and complex investments may affect solvency oversight.
Capital and Reserving
Regulators continue to update RBC and reserving work to keep standards aligned with changing risk.
How the NAIC Supports State Regulators
State insurance regulators make regulatory decisions. The NAIC supports them with shared tools, data, analysis, expertise, and public forums for developing standards. This includes investment analysis, securities valuation, structured securities review, statutory accounting, actuarial guidance, risk-based capital analysis, financial analysis, and committee work led by state regulators.
These resources help regulators identify investment risks early and apply consistent, risk-focused oversight across the state-based system of insurance regulation.
What This Means for Policyholders
- Better information: Enhanced reporting gives regulators more insight into investments that are not traded in public markets.
- More risk-sensitive capital: RBC updates help align capital requirements with investment risk.
- Stronger valuation review: Actuarial and investment analysis help regulators review hard-to-value assets and reserve adequacy.
- Oversight of complex structures: Work on reinsurance, affiliated asset managers, private equity ownership, and structured securities helps regulators see risks across companies and groups.
- Continued adaptation: The NAIC process allows state regulators to update standards as markets change.
Frequently Asked Questions
State regulators are strengthening oversight through better reporting, review of private ratings, updated capital standards, valuation guidance, reinsurance oversight, and investment analysis supported by the NAIC.
Yes. State regulators working through the NAIC have strengthened reporting, updated capital factors, advanced structured securities work, adopted supervisory considerations for private equity-owned insurers, and expanded tools to review complex investments.
Private credit can help insurers meet long-term investment needs, but some investments may be less liquid, less transparent, or harder to value. Regulators review these risks to help ensure insurers can meet their obligations to policyholders.
Insurer exposure can include private placement bonds, direct lending, bank loans, privately rated securities, asset-backed securities, collateralized loan obligations, and private credit funds. Risk depends on the structure, credit quality, liquidity, valuation, and role of each investment.
Private credit is not automatically risky or inappropriate for insurers. Regulators focus on whether each investment is transparent, properly valued, supported by appropriate capital, and managed with policyholder protection in mind.
Regulators use enhanced reporting, rating rationale reports, NAIC investment tools, and due diligence work to better understand the credit risk of privately rated securities.
Some reinsurance arrangements involve complex or less transparent assets. Regulators review these arrangements to understand how the assets supporting reinsured liabilities may affect solvency and policyholder protection.