U.S. and British regulators are increasing scrutiny of insurers’ exposure to private credit and other alternative assets, Fitch Ratings said in its update on global insurance regulatory developments.
The shift reflects broader concerns among prudential regulators about the rapid growth of private markets and the increasing complexity of insurers’ investment allocations.
Regulators in multiple jurisdictions have reportedly been reviewing whether existing capital frameworks adequately reflect the risk characteristics and liquidity profiles of structured credit and other illiquid assets.
The rating agency, which covers developments from October 2025 to March 2026, noted that the National Association of Insurance Commissioners (NAIC) continues to refine risk-based capital treatment for certain structured and alternative investments, including mortgage loan obligations (CLOs), Schedule BA mortgages and insurance company mortgages.
Fitch said the changes signal broader regulatory measures to reduce capital arbitrage in structured credit and private markets.
As a result, it expects life insurers to face greater capital volatility as the framework around private assets and alternative investment strategies evolves.
In the UK, the Prudential Regulation Authority (PRA) has set out supervisory priorities for 2026, including a streamlined supervisory approach, a FundedRe policy consultation to take place in the second quarter of 2026, and a system-wide exploratory scenario exercise to review insurers’ interconnected exposures to private markets under stress.
Fitch noted that prudential regulation could ultimately impose more stringent requirements on financed reinsurance arrangements, including higher governance standards, increased counterparty risk capital charges or potential restrictions on the use of such structures.
Despite the tightening focus, Fitch expects UK life insurers to expand their use of financed reinsurance from current lower levels.
Elsewhere, the report highlighted a more relaxed regulatory stance in parts of the Asia-Pacific region.
Regulators in Hong Kong, Australia and Taiwan have proposed or implemented measures aimed at easing capital requirements and supporting infrastructure investment, improving the affordability of life and annuity products and reducing earnings volatility associated with foreign exchange movements.
These measures generally appear to reflect a policy balance between maintaining prudential safeguards and encouraging long-term investment in real economy assets, particularly in markets seeking to expand insurance companies’ participation in domestic infrastructure financing.