Insurance investors boost demand for structured private credit

Rated note feeders have emerged as a key tool for insurers.

Insurance companies are playing a growing role in shaping the private credit market as they seek structured and transparent investment options, according to Dechert and Alternative Credit Council (ACC) – the private credit affiliate of the Alternative Investment Management Association (AIMA).

Rated note feeders have emerged as a key tool for insurers, with 63% of fund managers considering them for US clients and 35% for European and Asian insurers. 

Whilst these structures can be complex, they help insurers meet regulatory and capital requirements. Some insurers are also gaining exposure by lending directly to private credit funds.

Regulatory capital treatment remains a key concern for European insurers, who are watching reforms in the UK and EU for greater clarity on private credit allocations.

Across the broader market, investor demand for liquidity and co-investments continues to rise. 

About 64% of respondents reported higher demand for liquidity, up from 49% two years ago, whilst 92% of limited partners now seek co-investment opportunities, up from 70% in 2023. 

At the same time, smaller bespoke vehicles are declining, with only 6% of managers now offering SMAs below $50m, down from 23% two years ago.

Retail participation in private credit is also expanding. Over half of managers now serve retail clients, and 64% plan to target retail capital in upcoming funds, mainly through feeder funds and wealth management partnerships.

Luxembourg, the Cayman Islands, the US, Ireland, and the UK remain the top domiciles for private credit funds. 

Meanwhile, 66% of managers now use tiered management fee schedules, reflecting investor demand for greater transparency on how fee structures align fund managers’ interests with their own.