Earlier this month ALIRT Insurance Research published a new in-depth study examining the growing exposure of U.S. life insurers to less liquid bond investments, highlighting both the strategic benefits and emerging financial risks associated with this evolving portfolio trend.

HARTFORD, Conn., April 29, 2026 /PRNewswire/ — The report, U.S. Life Insurer Exposure to Less Liquid Bonds, finds that life insurers have significantly increased allocations to privately placed bonds and other related investments over the past decade. These private assets generally offer enhanced yields and support asset-liability matching for certain products, but may also present heightened liquidity, valuation, and capital risks during periods of market stress.

According to the study, the fair value of Level 3 (difficult to value) bonds held by the ALIRT Life Industry Composite rose from $183 billion in 2016 to $464 billion in 2025, increasing from 7.0% to 13.5% of total bond holdings. Meanwhile, privately placed bonds now account for 51.0% of total bond portfolios among the composite, surpassing publicly traded bonds for the first time.

The report notes that the shift to less liquid bond types has been observed across the life insurance industry, though insurers owned by private investment firms and asset managers have been among the most active participants in this trend. These companies often emphasize annuity-driven strategies that benefit from stronger portfolio yields. As a result, their bond portfolios generally show higher concentrations in private placements and asset-backed securities than the broader life insurance industry.

ALIRT also highlights increasing regulatory scrutiny of these asset classes. Recent actions by the National Association of Insurance Commissioners (NAIC) include revised bond classification standards, heightened capital requirements for certain structured securities, expanded oversight of private ratings, and enhanced authority for the Securities Valuation Office to challenge rating designations.

The study concludes that while most life insurers maintain diversified investment portfolios and hold solid capital buffers, companies with heavier allocations to less liquid assets—particularly those concentrated in fixed and fixed indexed annuity products—could face greater pressure if surrender rates rise or private debt markets weaken.

For more information, please contact Ricky Cheney at ricky.cheney@alirtresearch.com 

About ALIRT Insurance Research
ALIRT Insurance Research is an independent financial analysis firm specializing in monitoring insurer solvency and performance trends for institutional clients. Based in Hartford, Connecticut, ALIRT provides analytical insights that assist organizations in managing insurance company exposure and maintaining fiduciary oversight.

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SOURCE ALIRT Insurance Research