Private credit vs. public bonds: What are insurers seeing that’s prompting a portfolio pivot?
The combination of rising demand alongside rising caution, suggests that institutional investors aren’t backing away from risk assets, but they’re pricing in the likelihood of a rougher patch ahead and building in more selectivity before it arrives.
Macro anxiety hasn’t dented conviction
The survey’s risk rankings also double as a barometer of what’s keeping large institutional allocators up at night.
Geoeconomic risk topped the list, cited by 74% of respondents, well above credit risk and defaults (49%), interest rate volatility (48%) and market drawdown risk (46%). But that anxiety hasn’t translated into paralysis with 58% of insurers saying that they’re confident they’ll meet their three-year return targets, against just 2% who aren’t, with the remaining 40% sitting neutral rather than pessimistic.
“Geopolitical uncertainty, interest-rate volatility and credit deterioration are weighing heavily on investment decisions, shaping how insurers think about reinvestment, duration and liquidity,” said Eryn Bacewich, US Head of Insurance Solutions at Mercer. “The data points to an industry not simply chasing yield but trying to lock in income in a way that remains robust through a volatile macro and credit environment.”
Where the smart money is actually looking
The quality tilt within private credit allocations is itself a market signal. Insurers aren’t reaching into riskier corners of the asset class, they’re concentrating in investment grade direct lending and private placements, cited by 40% of respondents, and investment grade structured credit, asset-based finance, NAV lending and fund finance, cited by 38%.
