In its latest update on global insurance regulatory developments, Fitch Ratings says US and UK regulators are stepping up scrutiny of insurers’ exposure to private credit and other alternative assets.
The shift reflects broader concerns among prudential regulators about the rapid growth of private markets and the increasing complexity of insurers’ investment allocations.
Supervisors in multiple jurisdictions have reportedly been reviewing whether existing capital frameworks fully capture the risk characteristics and liquidity profiles of structured credit and other illiquid assets.
Covering developments from October 2025 to March 2026, the rating agency noted that the US National Association of Insurance Commissioners (NAIC) has continued to refine risk-based capital treatment for certain structured and alternative investments, including collateralised loan obligations (CLOs), Schedule BA mortgages, and insurer collateral loans.
Fitch said these changes point to a broader regulatory effort to reduce perceived capital arbitrage in structured credit and private markets.
As a result, it expects life insurers to face increased capital volatility as frameworks evolve around private assets and alternative investment strategies.
In the UK, the Prudential Regulation Authority (PRA) has set out its supervisory priorities for 2026, including a streamlined supervisory approach, a policy consultation on funded reinsurance (FundedRe) due in Q2 2026, and a system-wide exploratory scenario exercise examining insurers’ interconnected exposures to private markets under stress.
Fitch noted that the PRA could ultimately impose stricter requirements on funded reinsurance arrangements, including higher governance standards, increased counterparty risk capital charges, or potential limits on the use of such structures.
Despite this tightening focus, Fitch expects UK life insurers to expand their use of funded reinsurance from currently low levels.
Elsewhere, the report highlighted a more accommodative regulatory stance in parts of the Asia-Pacific.
Regulators in Hong Kong, Australia, and Taiwan have proposed or implemented measures aimed at easing capital requirements and supporting investment in infrastructure, improving the affordability of life and annuity products, and reducing earnings volatility linked to foreign exchange movements.
It would seem these measures generally reflect a policy balance between maintaining prudential safeguards and encouraging long-term investment in real economy assets, particularly in markets seeking to expand insurer participation in domestic infrastructure financing.
