Private credit annuity risk is real, but it is not a reason to panic. Life insurers have poured hundreds of billions of annuity dollars into privately negotiated loans, and regulators, the Federal Reserve and the financial press are right to watch it closely. For most retirees, the practical answer is to check a carrier’s ratings and ownership, understand the limits of your state’s guaranty association, and avoid putting everything with one company.

I have spent 20 years in annuity distribution and founded My Annuity Store in 2020. The headlines have gotten louder this year, so here is how I think about it, in plain terms.

What is private credit, and why is it tied to annuity risk?

Private credit is lending that happens outside the public bond market. Instead of buying a bond that trades every day, an insurer makes or buys a loan that is negotiated privately, often with a business, a fund or a pool of assets.

These loans usually pay more interest than comparable public bonds. The tradeoff is that they are harder to price, harder to sell quickly and less visible to outsiders.

The annuity connection is simple. When you buy a fixed or indexed annuity, the insurer invests your premium and uses the earnings to pay what it promised you, so what the insurer owns matters to you.

How much private credit do life insurers hold?

It is a lot, and it has grown fast. Researchers at the Chicago Fed found that life insurers’ private credit investments totaled $849 billion in 2024, or about 14 percent of their balance sheets.

Axios reported in April 2026 that the same $849 billion figure was more than double the 2014 level and close to half of the $1.8 trillion private credit sector. Its headline put it bluntly: the overlooked private credit risk is in life insurance.

The annuity boom is feeding the trend. Insurance Business reported in June 2026 that U.S. retail annuity sales hit a record $461 billion in 2025 and that life insurers’ private illiquid bond holdings reached $807 billion at year-end 2025, up $122 billion in a year, citing Moody’s.

Why do insurance companies buy private credit?

Mostly for yield and for fit. A higher-yielding loan lets an insurer offer a more competitive rate and still earn its margin.

Fit matters too. The Chicago Fed paper noted that newer forms of private credit can give insurers a better maturity and cash flow match with long-term obligations, especially in indexed annuities.

The same paper found that private-equity-owned insurers have driven much of this growth. It estimated that private credit investments account for 61 percent of the annuity market share gains made by those insurers.

What are the real risks?

From where I sit, four concerns stand out. None of them means a given company is in trouble, but each is worth understanding.

Opacity and private ratings

Public bonds are rated by well-known agencies and priced every day. Many private loans carry private letter ratings that the public never sees, and their values rely on models rather than market trades.

The NAIC, the organization of state insurance regulators, said in its April 2026 issue brief on private credit that it is building a due diligence framework for rating providers. It has also adopted a process to challenge ratings used for regulatory purposes when they do not reasonably reflect the investment risk.

Offshore and affiliated reinsurance

Some insurers pass annuity liabilities to reinsurers, including affiliated companies and reinsurers based offshore. American Banker reported in June 2026 that nearly $2 trillion in liabilities have been shifted to offshore and captive reinsurers, citing an estimate from forensic accountant Tom Gober.

That is one estimate, not an official tally, but regulators share the concern. The NAIC brief says it adopted Actuarial Guideline 55 to require added disclosure and testing of asset-intensive annuity reinsurance, including reinsurers in places like Bermuda and the Cayman Islands.

Affiliated lending

When an insurer is owned by an asset manager, some of its investments may be loans connected to its own affiliates. Insurance Business cited a March 2026 analysis finding that roughly a fifth of investments at some insurers affiliated with alternative asset managers were loans made to affiliated funds.

Liquidity and rising defaults

Private loans are hard to sell in a hurry. Axios described the worry that if private credit trouble spread, a wave of annuity surrenders could force insurers to sell assets at a bad time.

Defaults have also been climbing. Insurance Business reported that the private credit default rate tracked by Proskauer’s index rose to 2.73 percent in the first quarter of 2026, up from 1.84 percent two quarters earlier.

What protects annuity owners?

Here is the calmer half of the story. Annuity owners have several layers of protection, and regulators are not standing still.

Statutory reserves and risk-based capital

Insurers must hold reserves against what they owe policyholders, plus capital above that under the risk-based capital (RBC) system. The NAIC brief says regulators have strengthened asset adequacy testing under AG 53, raised the RBC charge on the riskiest slice of collateralized loan obligations to 45 percent, and require more detailed disclosure of private investments beginning with 2026 reporting.

The NAIC also stated that it does not treat private credit as inherently inappropriate for insurers. Its focus is on making sure capital, disclosure and supervision keep pace with the risk.

State guaranty associations, and their limits

If an insurer fails, your state’s life and health guaranty association steps in. According to NOLHGA’s product coverage FAQs, coverage for individual fixed, indexed and contingent deferred annuities is up to $250,000 in present value of annuity benefits under the NAIC model act.

Limits vary by state, and the American Council of Life Insurers notes that most states also cap total benefits at $300,000 for one person across all policies with the same insolvent insurer. That coverage is funded by assessments on the other insurers doing business in the state, not by a federal agency.

What should you check before buying an annuity?

I can’t give individual advice about your situation, and nobody can guarantee how any company will perform. What I can share is the checklist I would want anyone in my family to run.

  1. Look up the financial strength ratings. Check the carrier’s AM Best and S&P ratings, and read the rating date. You can compare carriers side by side with their ratings before you focus on rate alone.
  2. Ask how concentrated the portfolio is. Ask the agent or the company how much of the insurer’s portfolio sits in private placements, structured assets and affiliated investments. A heavier tilt is not automatically bad, but you should know it.
  3. Find out who owns the insurer. Ownership by a private-equity firm or asset manager is legal and common, and it is not a verdict on safety. It does tell you to ask about affiliated investments and reinsurance.
  4. Spread larger sums across carriers. Because guaranty limits apply per insolvent insurer, some people split money among several companies to keep each contract within their state’s limit.
  5. Call your state guaranty association. Confirm your state’s exact limits rather than relying on a general figure.

Rate still matters, but it should be the last thing you compare, not the first. A little homework on ratings, ownership and guaranty limits is the most practical way I know to manage private credit annuity risk.

Frequently Asked Questions

Is my annuity safe if my insurer invests in private credit?

Private credit alone does not make an annuity unsafe. What matters is the insurer’s overall financial strength, reserves and capital, along with your state’s guaranty association coverage if something does go wrong.

How much of my annuity is covered if an insurer fails?

Under the NAIC model act, guaranty associations cover up to $250,000 in present value of annuity benefits, and limits vary by state. Check with your own state’s association for the exact figure.

Should I avoid insurers owned by private-equity firms?

Not automatically. Ownership is one factor to weigh alongside ratings, portfolio mix and reinsurance practices, and it makes sense to understand all of them before you buy.

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