Concerns around insurers' holdings of private credit and private equity have recently put pressure on European insurance shares, prompting closer scrutiny of what sits inside their general account portfolios. Analysts at Bank of America have examined the sector's positions and conclude that headline risks may overstate the immediate threat.
Core allocations
According to the BofA team, European insurers allocate about 11% of their general account investments to private credit and private equity combined. That split is roughly 7% in private lending and 4% in private equity. While these private assets typically offer higher yields and the potential for stable long-term cash flows, they are relatively illiquid and can be more vulnerable in economic downturns.
Broader private asset picture
When the definition of private assets is expanded to incorporate residential and commercial mortgages plus real estate holdings, the share of private assets within insurers' portfolios rises substantially to around 27%. Much of that larger allocation, BofA notes, comprises high-quality mortgage portfolios and diversified real estate positions rather than concentrated, high-risk deals.
Variation across companies and regions
Exposure is not uniform. UK life insurers rank among the more exposed, with some firms holding between 15% and 25% of their portfolios in private lending or private equity. Dutch life insurers appear more defensive; their private asset exposure is largely in residential mortgage lending, which BofA treats as typically lower risk. Large European composite insurers generally sit below the sector average for private credit and equity holdings. For example, companies such as Generali and Zurich screen beneath the sector average. Property and casualty insurers also tend to have smaller allocations, reflecting their generally shorter liability durations.
Composition and risk mitigation
BofA highlights that the makeup of private credit holdings reduces some of the vulnerabilities commonly associated with the asset class. A substantial slice of insurers' private lending sits in infrastructure debt, where projects often generate stable, long-term cash flows. Sector diversification also appears robust. Holdings tied to software and technology companies - areas where default concerns have risen - represent only a small portion of insurers' private asset exposures, while infrastructure and energy projects account for a larger share.
Stress-test outcomes
Even under a stress scenario that assumes elevated default rates across private assets, BofA's estimates indicate the potential financial hit to the sector would be manageable. Their stress tests suggest losses equivalent to about 4% of the sector's market capitalization. BofA notes that such a level of loss could likely be absorbed, given insurers' solid capital positions.
Takeaway
Bank of America's analysis indicates that while private asset exposures are material and heterogeneous across the European insurance sector, the direct footprint of private credit and private equity is modest relative to total portfolios. Broader private asset allocations rise considerably when mortgages and real estate are included, but much of that exposure is concentrated in higher-quality mortgage and diversified real estate holdings. Company- and region-specific differences mean some insurers face greater sensitivity to private asset stress, but sector-level capital buffers and the nature of current private credit holdings help limit broader systemic risk.