Odd Lots · Friday, July 31, 2026
Regulators face challenges in assessing the true risk of private credit assets held by insurers, as valuations are often opaque and rely on third-party ratings with potentially skewed incentives. This lack of transparency hinders effective oversight and capital assessment.
“And then they see, like this private credit loan is valued. It's like a double A, and then they give you a notch on a scale of one to ten, and you get this. Picture as an ensure, these private credit assets are x amount of safe.”
“The NAIC, which is an association of regulators, essentially has visibility on insurer's balance sheet and they look at everything they invest in. This could be equity, cash safe bonds whatever that means, and private credit bonds, and all the insure regulator sees is the value reported to them, which is usually outsourced to a third party rating agency.”
“It's just extremely difficult, and so there's a variety of new empirical literature and economics that's coming out basically every week where people will do various sorts of tests and they'll just continually find over valuation and a lot of these assets.”