More and more private credit is ending up on the balance sheets of US life insurers. And there are lots of good reasons for this.

Insurers tend to have less need for the liquidity offered by public market credit, and so private credit offers them a way to cash-in on their (il)liquidity preference, build more diversified, higher-returning portfolios, and better match their liabilities.

Unfortunately, as Alphaville highlighted last week, private credit valuation is a challenge — at least for regulators charged with protecting customers and supervising insurers. Most obviously, private credit lacks a public market. And without public markets, regulators have to rely more on insurers to mark their own homework when it comes to stumping up additional capital to put against future credit losses.