European and North American insurers are taking opposite approaches to private credit markets, with European firms holding back while their American counterparts deepen alternative asset partnerships.
Axa CEO Thomas Buberl stated the company's private credit exposure sits "far below" competitors. Allianz chief investment officer Claire-Marie Coste-Lepoutre said the firm remains "very comfortable" with its current position, signaling no plans to expand aggressively into the asset class.
North American insurers are moving in the opposite direction. North American Company for Life and Health Insurance, one of the largest U.S. fixed index annuity issuers, is expanding its alternative investment partnerships to boost portfolio yields.
The insurer launched a new growth-focused index option for its Secure Horizon FIA products. Tom Haines, the company's executive, said the index "has low correlation to the other indices in the portfolio," providing diversification for agents and clients.
The strategic split stems from differing regulatory environments and balance sheet structures. European insurers operate under Solvency II capital rules that impose higher capital charges on illiquid assets, making private credit less attractive from a regulatory capital perspective.
North American insurers face pressure to generate higher yields on their general account portfolios. Fixed index annuities promise minimum guaranteed returns plus upside linked to market indices, requiring insurers to earn returns above those guarantees to maintain profitability.
Private credit typically offers 200-400 basis points above comparable public bonds, making it attractive for insurers seeking yield. However, the asset class carries liquidity risk and requires sophisticated credit analysis capabilities.
The divergence also reflects different views on credit cycle timing. European insurers may be waiting for better entry points as private credit markets mature and pricing becomes more transparent. North American firms appear willing to accept current valuations in exchange for immediate yield enhancement.
Insurers are also using reinsurance transactions and strategic divestitures to manage risk as they adjust their alternative asset allocations. These moves allow companies to maintain balance sheet flexibility while pursuing higher-yielding investments in private markets.
