Officials at the U.S. Treasury Department plan to discuss recent developments in private credit markets with states insurance regulators in the United States and also with insurance regulators in other countries.
The department will soon convene meetings with the regulators about the private credit topic, officials said Wednesday.
The meetings will start this month and continue through early May, according to the department's announcement.
"The Treasury Department regularly confers with federal financial regulators," officials said. "This first series of meetings will facilitate greater regular communication with the state insurance regulators, who serve as the insurance industry's primary regulators, and lay the groundwork for sustained close collaboration."
What it means: Treasury officials think U.S. insurers' investments in private credit will make an interesting topic of conversation.
The backdrop: Private credit default rates have been low, and Marc Rowan, the chief executive officer of a major private credit provider, Apollo Global Management, has argued that the market for private credit is broader, deeper and probably more stable than the markets for many other widely accepted assets.
Private credit providers have traditionally catered to institutional investors and required the institutional investors to commit to long-term investments.
In recent years, private credit providers have let retail investors participate through private credit funds. The fund managers tried to make the funds like ordinary mutual funds by offering the retail investors relatively easy access to their money.
In recent months, the private credit default rate has increased to 5.8%, according to Fitch Ratings.
Starting in February, commentaries about how the rise of artificial intelligence could affect private-credit-financed software developers spooked retail investors. Some retail investors rushed to pull assets out. Fund managers responded by adding redemption limits.
The Congressional Research Service report: Eva Su, a Congressional Research Service analyst, included a list of recent private credit fund redemption restrictions in an analysis of private credit market restrictions posted Thursday.
The Congressional Research Service briefs lawmakers and their aides on issues that are, or soon could be, under discussion in Congress.
The 10 restrictions listed in the report affect funds ranging in size from $1.6 billion to $82 billion. One Blue Owl fund has suspended quarterly redemptions. Another fund set a redemption limit of 7% of the fund's net asset value per quarter. For the other eight funds, the redemption cap was 5%.
Su included a section on whether private credit developments might affect other markets and a chart showing that insurers account for just 5% of lending to private credit.
Insurance companies "reportedly hold 8% of their assets in private credit," Su said. "The Treasury Department has scheduled meetings with insurance regulators to discuss related conditions."
In a discussion of policy considerations, Su suggested that policymakers' objective might be to enable effective risk monitoring and accurate risk pricing, rather than to try to eliminate private credit market risks.
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