APAC insurers turn to private credit as bond shortages squeeze yields

The asset class helps match long-term liabilities in markets with scarce high-quality local bonds.

Private credit investments held by major insurance companies across the Asia-Pacific (APAC) region remain at manageable levels.

In 2025, allocations to private credit generally stayed below 5% of total assets, or within 10% of equity capital, which includes the contractual service margin, according to a report by Fitch Ratings. 

Whilst these investments have risen over the last two to three years, the ratings agency believes private credit is becoming a standard part of insurance investment strategies without significantly altering overall portfolio risk.

Fitch notes that APAC insurers are controlling these risks by spreading investments across different managers, borrowers, sectors, and regions. 

They also focus on conservative sectors, limit leverage, and prefer senior secured or senior asset-backed lending. 

However, close monitoring of valuations, credit downgrades, and defaults remains vital because private credit is inherently illiquid and less transparent than public markets.

New regulatory frameworks and accounting rules are also driving interest in the asset class. 

Many APAC countries have adopted new risk-based capital systems that look through to the underlying assets of fixed-income funds.

Under these rules, capital requirements are based on credit quality and maturity rather than whether the asset is publicly traded, treating private credit similarly to standard bonds and more favourably than shares.

Insurers are primarily expanding into private credit to boost yields, diversify risks, and better match the long duration of their liabilities. 

This is particularly true in markets where long-term, high-quality bonds in local currencies are scarce. 

Additionally, the stable cash flows and low valuation volatility of private credit fit well with insurers' strategies following the introduction of the IFRS 17 and IFRS 9 accounting standards.