German insurers’ private credit allocations set to rise, says Moody’s

German insurers are set to boost their private credit allocations, according to a Moody’s Ratings report. Private credit currently makes up around 9.3% of their total invested assets, exceeding the European insurance sector average of 7.5%. Germany accounted for about half of Europe’s private credit exposure, alongside France and the Netherlands which together accounted for 72%.

The share of illiquid assets in German insurers’ portfolios rose from 15.8% in 2019 to 19.4% in 2025. Among life insurers, this increased from 19% to 25.1%. Mortgages and loans comprised about 71% of German insurers’ private credit investments, with unlisted corporate bonds accounting for an additional 21%, totaling €92bn at the end of 2024.

Moody’s anticipates insurers will broaden their private credit investments beyond traditional private placements into direct corporate lending, infrastructure debt, and asset-based finance. This expansion is fueled by demand for long-term, income-generating assets. The agency also sees potential opportunities in German infrastructure, defense, energy transition, and digitalization projects.

However, Moody’s cautioned that limited secondary-market liquidity and valuation uncertainty could heighten investment risks, especially as insurers delve into more complex private credit strategies. Despite these concerns, the agency does not anticipate further private credit investments to significantly weaken insurers’ financial positions, citing strong capitalization and robust risk management practices.

German life insurers boasted an average Solvency II coverage ratio of 374% at the year-end, and Moody’s predicts private credit exposure to potentially grow faster than overall illiquid asset holdings. Portfolio reallocation is expected to drive much of this increase.