UK pension insurers have allocated about 10 per cent of their portfolios to opaque, hard-to-price private assets, according to an S&P report warning of growing risks and potential liquidity issues in a crisis. The research found private credit holdings in the most opaque category — Level 3 assets lacking observable pricing inputs — exceeded 10 per cent at Legal & General, Standard Life, and Just Group.

Insurers specialising in pension risk transfer deals, which aim to assume up to £500bn in British pension liabilities over the next decade, have increased allocations to private loans to match long-term policyholder commitments. Private capital firms such as Apollo, Blackstone, and Brookfield are driving a lending boom to AI companies, data centres, and middle-market borrowers, increasingly replacing traditional bank financing.

S&P analyst Charles-Marie Delpuech noted market participants lack visibility into insurers' holdings, as disclosure requirements are limited. A stress test of a hypothetical insurer with 12 per cent private credit exposure showed sufficient capital to withstand a 2008-style shock. Insurers argue private assets provide necessary long-duration diversification, with L&G's Roman Hederer and Standard Life's Nuwan Goonetilleke citing liability matching benefits.