By Isla Binnie
NEW YORK, June 10 (Reuters) – Private credit helps insurance companies generate the money they need to make payments, and increased attention from regulators will ultimately help the industry, the chief executive of private capital firm Ares said on Wednesday.
“Insurance companies need private credit,” Michael Arougheti told the Morgan Stanley US Financials conference in New York.
“When we look at the requirement to generate excess return, and you look at the current size of the traded markets, in order for them to meet the objectives of their policyholders, they rely on private credit,” he added.
U.S. life and annuity insurers’ private credit holdings more than doubled over the last 10 years while official interest rates were historically low, according to ratings company and insurance industry specialist AM Best.
U.S. Treasury secretary Scott Bessent has consulted with state insurance commissioners to improve oversight amid concerns about transparency, lending discipline, and a pullback among wealthy individuals from funds that gave them access to the rarely traded asset class.
“Regulation does not mean bad,” Arougheti said. “As (the) insurance industry continues to lean into private markets investing, the regulator is going to want more transparency into structures and performance, which is absolutely appropriate,” Arougheti said.
(Reporting by Isla Binnie, Editing by Nick Zieminski)
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