When the world's largest, most conservative pools of capital start reshaping their portfolios, it's usually worth asking what they're seeing that others aren't.
Marsh's 2026 Global Insurance Investment Survey, covering 123 insurers across 24 countries and more than $4 trillion in assets, offers a window into how institutional money is reading the current market, and the picture is one of an industry positioning for a later-stage credit cycle while still reaching for yield.
The clearest market signal in the survey is the reversal in how insurers rank private credit against public fixed income.
Fifty-seven percent of respondents plan to increase private credit exposure over the next 12 to 24 months, ahead of the 48% planning to add to public investment grade bonds. Two years ago, that order was flipped, with 37% of insurers favoring core fixed income over the 32% who wanted more private debt.
That shift suggests private credit has stopped being viewed as a niche allocation and is now treated as core portfolio infrastructure, which in turn tells the market that spreads and structural protections in the asset class have become attractive enough, and liquid enough, for even liability-driven investors to lean in.
Insurers aren't chasing this shift blindly, and the risks they flag double as a read on where the broader credit market sits in its cycle.
Sixty-six percent pointed to a shrinking illiquidity premium and tightening spreads, which signals that the easy compensation for taking on less liquid exposure has largely been priced away. More than half cited deteriorating underwriting standards or weakening covenants, and 51% pointed to rising defaults, spreads or payment-in-kind structures.
"Capitalizing on the benefits of private credit will require insurers to have a rigorous process for manager selection. It will be important for them to choose managers who demonstrate sourcing, underwriting, portfolio construction and workout capability to navigate the next phase of the credit cycle," said Amit Popat, Mercer's Global Head of Financial Institutions.
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.
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."
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%.
That suggests the growth story in private credit right now is being driven less by yield-chasing and more by the expansion of high quality, asset-backed supply that didn't exist at scale in previous cycles.
"Private credit is a compelling opportunity for insurers, especially in the asset-backed space. Insurers can diversify away from corporate risk while realizing meaningful yield pickup over similar rated, investment-grade public market bonds," said David Morrow, Mercer's Global Insurance Proposition Leader.
US insurers (65%) and Canadian insurers (74%) are moving faster than their European (51%) and UK (46%) counterparts, likely reflecting how developed the private credit ecosystem already is in North America.
Scale reinforces the same pattern: 81% of insurers with more than $25 billion in assets plan to increase private credit allocations, versus 46% of smaller firms, while life insurers (73%) are moving faster than health insurers (56%) and P&C insurers (40%), largely a function of which balance sheets can absorb illiquidity.
Perhaps the most telling signal in the whole survey is the gap between what insurers want to do and what they're actually equipped to do.
Only 30% of respondents said they have most of the in-house capability needed to research and allocate across relevant private market asset classes, and 21% said they have none at all. That gap was sharpest between insurer types, with 43% of life insurers reporting strong in-house capability versus just 21% of P&C insurers.
Regulatory challenges were the most commonly cited obstacle to deploying more capital, named by 42% of respondents, ahead of liquidity concerns (37%) and governance or manager-selection challenges (33%). Read together, this tells the market that private credit's growth is currently being gated less by investor demand and more by execution capacity, which points toward continued consolidation around managers and platforms that can offer that capability off the shelf.
"Even the largest insurers recognize they don't have all the capabilities or origination capacity in-house and are looking to outside private credit managers to help fill gaps and boost risk-adjusted yields. Everyone is looking to build out their capabilities, and that often means finding partners that can help navigate the complexities across different parts of the sprawling private credit market," said Josh Zwick, a partner in Oliver Wyman's Insurance and Asset Management practice.
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