US Treasury convenes regulators to assess private credit risks

The US Treasury is set to hold discussions with domestic and international insurance regulators to examine potential vulnerabilities in private credit markets, following recent turbulence in the sector, according to a report by the Financial Times.

According to the department, the initial meetings will focus on reviewing recent market developments, identifying emerging risks, and evaluating current risk management approaches, as well as the broader outlook for private credit.

The initiative reflects increasing concern among policymakers in Washington over the rapid expansion of private credit and its potential implications for financial stability. Participants will include both US-based and global insurance supervisory bodies.

Over the past decade, insurers – particularly in the US, where oversight is largely conducted at the state level – have become more closely linked with private capital markets. In pursuit of higher yields, life insurers have allocated capital to private credit assets such as real estate debt and structured products backed by loans tied to assets ranging from renewable energy infrastructure to aircraft leasing.

At the same time, major alternative asset managers including Apollo Global Management and KKR have acquired insurance and annuity businesses, while others such as Blackstone have formed partnerships with insurers to oversee investment portfolios.

This growing interconnectedness has raised regulatory concerns, particularly given the relative opacity, illiquidity, and structural complexity of private credit instruments compared with traditional fixed-income assets like government and corporate bonds. Insurers are also increasingly dependent on specialist rating agencies to assess these investments, adding another layer of scrutiny.

Although life insurers typically prioritise highly rated securities, questions have recently emerged over the reliability of some ratings applied to private credit products.

The Treasury indicated that the discussions are intended to foster ongoing coordination with regulators and form part of a broader pattern of regular engagement. The first meetings are scheduled to begin in April, with additional sessions planned through the summer.

The regulatory focus comes amid heightened unease across Wall Street over potential losses in private credit. Recent bankruptcies, including those of auto parts supplier First Brands Group and used car retailer Tricolor, have drawn attention to asset-based lending strategies and prompted questions around underwriting standards.

Further pressure has come from investor withdrawals at large funds, alongside moves by firms such as Ares Management, Apollo, and KKR to restrict redemptions from direct lending vehicles.

Concerns have also intensified around leveraged loans to private equity-backed software companies, where some investors fear exposure to disruption from artificial intelligence.