In a series of high-level meetings, US Treasury Secretary Scott Bessent convened with leaders from the National Association of Insurance Commissioners (NAIC) to discuss the systemic implications of the insurance sector’s growing engagement with private credit and offshore reinsurance. 

This regulatory dialogue signals a pivotal shift in managing the stability of long-term life and annuity markets amid private equity-led consolidation. 

This is especially true as the lines between insurance, asset management, and private markets are becoming less distinct, leading to increased regulatory focus in Washington. 

The $1.5 trillion offshore reinsurance question

The core of the discussion is the vast volume of US life and annuity liabilities now managed through offshore jurisdictions, predominantly Bermuda. 

The insurance market has changed significantly. Insurers are now active players in complex credit systems rather than just holding government bonds. Bermuda’s long-term reinsurance sector manages around $1.52 trillion in assets, primarily tied to US policyholders.

The Treasury examines not only geographical factors but also liquidity and ownership structures. Numerous offshore entities are owned or linked to private equity firms.

Regulators express concern that these asset-intensive business models, while yielding higher returns in a low-interest environment, may lack sufficient liquidity buffers to withstand sudden policyholder withdrawals or sharp credit market downturns.

The regulatory focus has been in a structured timeline.

In late 2025, the NAIC Life Risk-Based Capital Working Group discussed Proposal 2025-16-L, which targets new capital factors for CLOs and private credit.

Public comment periods closed on proposed changes to insurers’ risk-based capital requirements, particularly addressing “asset-intensive” reinsurance in January 2026.

In March 2026, regulators at the NAIC Spring National Meeting finalized field tests for new economic scenario generators needed for stress-testing private equity-backed portfolios.

Then, in April 2026, the US Treasury Department initiated dedicated dialogues with domestic and international regulators focusing on the private credit market.

In May 2026, Treasury Secretary Scott Bessent led a high-level meeting with the NAIC, signalling strong federal-state regulatory alignment.

What are the key regulatory concerns?

There are three key concerns. 

Private credit exposure. US insurers have substantially increased holdings in collateralised loan obligations (CLOs) and other private debt instruments to enhance yields.

Private letter ratings. There is a growing demand for transparency regarding bespoke or private credit asset ratings, which often bypass traditional public rating agencies.

Capital neutrality. Regulators are investigating whether shifting reserves offshore creates capital arbitrage opportunities, allowing insurers to reduce capital requirements without mitigating underlying risks.

What are the broader implications?

While the Treasury supports the US state-based regulatory framework, the emphasis on fit-for-purpose regulation marks the end of light-touch oversight for private equity-backed insurers.

Enhanced due diligence. Finance teams involved in pension de-risking or group annuity contracts need to look beyond credit ratings. They should evaluate the reinsurance locations of liabilities and the liquidity of private credit portfolios, as this is essential for fiduciary responsibility.

Risk-based capital frameworks. NAIC and Treasury coordination suggest stricter capital charges for certain private credit assets, potentially increasing pricing for insurance-linked financial products that corporates use to manage long-term liabilities.

Focus on real-world liquidity. Stress testing will intensify, emphasising the ability to exit illiquid private loan positions during market volatility. Insurers must demonstrate portfolio resilience to meet long-term policyholder commitments amid credit market stress.

The Treasury’s engagement signals not a crackdown but a move toward sophisticated alignment between federal oversight and state regulation. The insurance industry’s financial architecture is shifting from a buy-and-hold bond model to an originate-and-fund model powered by private capital.