Fitch Ratings, the credit ratings agency, has highlighted the potential governance implications for the US life insurance sector following Delaware Life Insurance Company’s recent reclassification of certain investments as affiliated holdings.
The agency said the development reflects a broader trend as life insurers increase their use of private credit, affiliated asset management relationships and more complex investment and reinsurance arrangements.
Fitch Ratings said the expansion of these structures is creating additional governance considerations for insurers, particularly where increased complexity makes risk assessment more challenging.
The agency noted that limited transparency, weaker oversight frameworks and insufficient disclosure could affect confidence in financial reporting, investment management and capital strength, even where insurers continue to demonstrate stable earnings and adequate solvency levels.
Fitch Ratings expects governance practices, disclosure standards and board supervision of affiliated exposures to become increasingly significant factors influencing credit assessments in the near to medium term.
Following the reclassification of a substantial amount of private credit investments as affiliated investments, Fitch Ratings placed Delaware Life Insurance Company on Rating Watch Negative.
Fitch Ratings said the change prompted questions around governance arrangements, financial reporting practices and investment controls. The agency reported that Delaware Life’s affiliated investment exposure increased by almost twenty times following the reclassification, reaching 40% of invested assets compared with 2% at year-end 2025. Fitch Ratings said this revised exposure represented the highest level among the North American life insurers within its rated portfolio at year-end 2025.
The agency added that, while affiliated investments can differ significantly in structure and risk profile, they are subject to closer review because of potential concerns relating to conflicts of interest, liquidity and transparency.
Fitch Ratings said the closer relationship between insurers and alternative asset managers is not inherently negative for credit quality when supported by effective governance and strong risk controls.
However, the agency said these arrangements may become credit negative where oversight and disclosure practices do not adequately support the complexity of insurers’ business models.
Fitch Ratings noted that increased partnerships with alternative investment managers, combined with greater allocations to less transparent assets, derivatives and asset-intensive reinsurance, have contributed to greater complexity across the insurance industry.
According to Fitch Ratings, the impact of these developments will vary among insurers depending on their business models and governance structures.
The agency said larger life insurers with affiliated asset management operations, significant private credit exposure or asset-intensive reinsurance strategies may face greater governance and disclosure challenges, as assessing valuations, concentration risks and related-party relationships can be more difficult when public information is limited.
Fitch Ratings said insurers with simpler investment portfolios, clearer organisational structures and stronger independent oversight mechanisms are better positioned to manage these risks.
The agency considers investment transparency, effective board oversight, independent governance committees and comprehensive disclosures when evaluating governance.
Fitch Ratings said disclosures that are in line with, or exceed, regulatory expectations are generally viewed as neutral from a ratings perspective, while inadequate disclosure practices could place downward pressure on ratings. The agency expects governance considerations to play a greater role in future ratings assessments as life insurers become more reliant on complex investment strategies, external partnerships and affiliated businesses.
