The Credit Behind the Annuity

IntroductionThe question, and the method

Life and annuity insurers have taken on a lot of private credit. How much does the public record say, and where does it stop being able to say?

The method is the one used in chapters 12 and 13. Read primary documents, not commentary. Type every figure the documents state into a script, recompute everything that can be recomputed from them, and say plainly which statements were read but cannot be recomputed. Then turn what is known and unknown into questions a client’s risk team could put to its own filings.

Two of the headline figures turn out to be less specific than they sound. The $1.2 trillion that circulates in the press is a sum of five categories defined by structure, not by credit quality. And the NAIC’s own report gives no split of it by type of insurer, so the claim that this is mostly a life-insurer exposure can be supported in direction but not measured here.

Section 1 · Year-end 2025Questions raised

Four numbers from the record, each leaving open what a risk team would need to know.

These raise five questions the documents do not settle:

1. How much of the $1.21 trillion sits with life and annuity writers? Life insurers hold 63.6% of all cash and invested assets, and the private-credit report says private placement lending is mainly held by life insurers. It gives no dollar split by insurer type.
2. What is in the $544 billion that a rating does not describe? $512 billion of it is bonds carrying a private letter rating. The credit view behind each is one rating provider’s, filed with the NAIC.
3. Are the five categories additive? The report says they are not mutually exclusive and that it removed identifiable overlap. The five listed values add to exactly $1,210 billion; the report’s text gives different totals for some categories than its table does, which the next section reconciles where it can.
4. How would any of it perform in a downturn? The NAIC says private credit has not been tested by a prolonged, fully stressed credit cycle.
5. What changes next? New private-placement disclosures take effect with year-end 2026 filings, so the baseline below is the last one built without them.

Section 2 · From the tablesAnalysis

A. Where the assets are

Table 1 of the asset-mix report gives total cash and invested assets by sector, in millions of dollars. The shares are the author’s division, recomputed by script.

The three sectors add to 9,569,079, which is 11,506 million (0.12%) less than the industry figure. The report separately discusses title insurers, and the author takes them to be the remainder; the report was not read closely enough to confirm that, and the gap is too small to change anything below.

B. Which way the mix is moving

Bonds were $5,727,555 million, 59.8% of industry cash and invested assets, down from 60.4% the year before, and grew 5.6%. Schedule BA, the schedule for other long-term invested assets, was $638,817 million, 6.7% of the total, up 10.5% from $578,346 million. As a check on the reported growth rates: if the industry total grew 6.7%, the implied 2024 total is about $8.98 trillion; bonds at 5.6% less growth then come to 60.4% of it, which matches the report, and Schedule BA to about 6.4%. So the reported figures agree with one another, and the share of Schedule BA rose from about 6.4% to 6.7% in one year. The report notes the NAIC’s new bond definition, effective 1 January 2025, “possibly contributed” to the Schedule BA growth, so part of the move may be reclassification, not new buying. The report does not separate the two.

C. What is in the $1.21 trillion

The private-credit report lists five categories, with values in billions of dollars as of year-end 2025 (book or adjusted carrying value):

The five add to 1,210, the focus group to 544, and the other three to 666, matching the figures the NAIC states. Against industry totals, 1,210 is 12.6% of cash and invested assets (the NAIC says about 13%) and 21.1% of bonds (about 21%); 544 is 5.7% of cash and invested assets (about 6%) and 9.5% of bonds (about 9%). All four agree with the NAIC’s rounding. One caution on the bond ratio: the $1.21 trillion includes items that are not bonds, such as business development company holdings, so “21% of bonds” compares unlike things and is a scale marker, not a share.

The categories are defined by how the investment is structured, and the 666 billion the NAIC treats as lower-complexity is more than the 544 billion it flags. The text also gives larger totals for some categories than the table: about $990 billion of private placement bonds against 580 in the table, and $95 billion of bank loans against 44. The table figures exclude what is counted elsewhere in the table, which is how the report avoids double counting; the author could reconcile the middle-market CLO figure (65 total, 23 privately rated, 42 in the table) but not the private-placement one, since the 990 and the 512 privately rated bonds overlap by an amount the report does not give.

D. A ceiling, not an estimate

The report does not say how much of the $544 billion life insurers hold. It is still possible to bound the answer from the two tables. If every dollar of the focus group sat with life insurers, it would be 8.9% of their cash and invested assets; if all $1.21 trillion did, 19.8%. Spread evenly across the whole industry the figures would be 5.7% and 12.6%. The true life-sector share lies somewhere below the ceiling and, because the report says private placement lending is mainly a life-insurer activity, probably above the even spread. That is a statement about direction and bounds. It is not a measurement, and it cannot be turned into one without insurer-level filings.

E. What the early-warning figures are

The NAIC page reports that, as of the third quarter of 2025, non-accruals were below their ten-year average, payment-in-kind interest was about 7% of private borrowers’ interest against a decade average of about 6% (the report attributes this to the Cliffwater index), and that a record 40% of 2025 default actions involved borrowers that had defaulted before. These are market-wide indicators of private lending, not measurements of insurers’ holdings, and the page does not name the source of the 40% figure. They show the direction in which a risk team would watch its own book, not what that book contains.

Section 3Recommendations

Seven questions a client’s risk team could put to its own filings, each taken from a statement in the documents.

1. Map our book to the NAIC’s five categories and reconcile to our statutory filing. The categories overlap and the NAIC’s own totals required removing overlap. We should know our count before anyone quotes the industry’s.
2. For each privately rated bond, who rated it, and does our own view agree? The NAIC’s designation for these securities rests on the rating provider’s rating; regulators are building challenge authority and a due-diligence framework for those ratings, so a client should expect its own to be questioned.
3. Look through the funds and feeder structures. The report says simple text searches may miss alternative-asset and complex-structure exposure. What is under each fund, and is the same loan visible to us twice?
4. Where are the assets behind our reinsurance? Asset-intensive reinsurance is on the regulators’ stated list for review, so our exposure may sit with a counterparty, not on our own schedule.
5. What does our liquidity and asset-adequacy testing assume about a prolonged downturn? The NAIC says the market has not been through one.
6. Track the early-warning indicators on our own book, not the market’s. Non-accruals, payment-in-kind share and repeat defaulters are measured here for private lending as a whole.
7. Build the year-end 2025 baseline now. The new private-placement disclosures arrive with year-end 2026 filings; a year-on-year comparison needs the old basis written down before it disappears.

Section 4Actions

If this were a first month on a client team, the order would be:

• Week 1. Obtain the client’s year-end 2025 Schedule D and Schedule BA detail and tag each line to the five categories. Record which lines could belong to more than one.
• Week 2. For the privately rated lines, list the rating provider, the rating, the date and whether the rating rationale is on file. Flag any line where the client holds no independent view.
• Week 3. Open the fund and feeder lines to the underlying assets, and list the reinsurance counterparties that hold assets on the client’s behalf.
• Week 4. Compare the client’s shares with the 5.7% and 12.6% industry figures and, for a life writer, with the 8.9% and 19.8% ceilings above, then write down why each differs. Hand over the map, the exceptions and the list of what was not available.

Section 5Follow-through

Three things would show whether this reading held. First, the year-end 2026 reports on the same tables: whether the focus group grew faster than bonds again, and whether the new disclosures move the 990-billion private-placement figure. Second, whether the NAIC publishes the split by insurer type that is missing here, which would turn the ceiling in section 2D into a measurement. Third, whether the early-warning indicators in section 2E move for the worse. If the focus group shrinks or the split shows life insurers well below the even spread, the direction claimed in the introduction is wrong and this chapter should say so under Updates.

LimitsWhat this does not show

• Any insurance-industry, actuarial, audit or advisory experience. The author has none to claim here; this is a reading exercise.
• Any single insurer. The NAIC says its report is not an assessment of any specific insurer or investment, and this chapter adds none.
• Life and annuity exposure as a number. The documents give no split by insurer type; section 2D gives bounds only.
• Mortgage loans. The private-credit report excludes them.
• Credit quality. The categories are structural. Nothing here says any holding is weak.
• The Federal Reserve, rating agencies and trade press. Their commentary on insurers’ private credit was found in a search and not opened, so none of it is used.
• Capital. Surplus and risk-based capital were not read, so no figure here says whether any exposure is large relative to what absorbs losses.
• Anything after the date read. Documents were read on 9 November 2026.

UpdatesWhat changed after the first version