Reassessing Value for Insurers in European Credit Markets

This technical report examines the evolving landscape of European credit markets, focusing on the dynamics between private credit and public market instruments such as high yield bonds and leveraged loans. It outlines how insurance companies have increasingly allocated resources to private credit to target higher returns and diversify their credit exposures. The report details the competitive nature of these markets, especially post-COVID, where banks have eased lending conditions, impacting the market share of private credit lenders. It discusses the regulatory treatment of private debt for insurers, noting that it is often viewed favorably compared to public market credit from a Solvency Capital Requirement perspective. The report also highlights the liquidity profiles of various investment options and the implications for insurers' asset-liability management. Additionally, it addresses the shift in private credit growth towards asset-based finance and the challenges faced by private credit companies in exiting investments amid high interest rates and market volatility.