The credit analysis and research firm Moody’s Ratings reports that US life insurers continue to expand their investments in collateralised loan obligations, though the pace of increase has become more measured compared with previous years.
The agency attributes this to insurers distributing new funds across a broader suite of private assets, including private credit, private placements, infrastructure lending, and other structured instruments.
Moody’s states that total CLO holdings reached roughly $190 billion by the end of 2024, accounting for about 4% of the sector’s overall invested assets. While this proportion is modest across the industry, some individual insurers hold significantly higher concentrations of more than 18%.
The agency observes a slight uplift in credit quality, with insurers trimming riskier positions at the margins. The bulk of holdings sit in the strongest NAIC SVO designations, with over 39% in the 1A tier. Approximately one quarter fall within Aa categories, while around one third are assessed in single-A and Baa groupings. Only a small slice, around 3%, falls below investment grade, and Moody’s notes that these exposures have been reduced relative to 2022.
Although insurers continue to build CLO portfolios, Moody’s remarks that growth now aligns more closely with the general expansion of invested assets across the sector. This moderation comes during a period of unusually high levels of CLO issuance.
Fresh transactions, refinancings, and resets were substantial in 2024 and stayed active through much of 2025. Moody’s expects insurers’ future allocations to mirror wider market activity rather than repeat the rapid accumulation seen in earlier years.
The agency also points out that insurers distribute their holdings fairly evenly across vintages. Roughly 55% of positions stem from 2021–2024, and about 77% remain within their reinvestment windows. Moody’s views this balance positively, given that performance tends to cluster by year of issue. Insurers have also been expanding their interest in middle-market CLOs, which reached roughly $25 billion at the end of 2024 and represent around one fifth of the latest vintages. These middle-market holdings generally receive slightly stronger SVO assessments than broadly syndicated loan CLOs.
Despite a period in which loan spreads tightened and weighted-average rating factors rose somewhat, especially in amortising deals, Moody’s indicates that senior over-collateralisation buffers remain sturdy. This is helped by swift principal paydowns in amortising structures and the robust protective features typical of CLOs.
In discussing the First Brands default, the agency underscores the value of limits on individual borrower exposure, sector diversification requirements, collateral quality rules, and active portfolio management. CLO structures also divert surplus interest to senior notes when necessary, a safeguard Moody’s highlights as vital for maintaining senior-level stability during periods of increased defaults.
Moody’s further notes that insurers’ exposure to collateral managers is widely spread. No single manager oversees more than roughly 4% of total insurer CLO holdings. Prominent names include Carlyle, Blackstone, and Golub Capital. While this dispersion is viewed positively, Moody’s comments that a small number of insurers maintain more substantial commitments with specific managers, which can heighten overlap in underlying loan portfolios.
On the regulatory front, the landscape remains unsettled. US regulators, through the NAIC, continue to shape new approaches for determining risk-based capital requirements for CLOs. A scenario-based modelling framework is under review, supported by related work from the American Academy of Actuaries. Moody’s notes that the eventual capital regime will depend on coordination across these initiatives, and final parameters have not yet been established.
Overall, Moody’s concludes that despite shifting credit conditions, the combination of strong structural protections, diversified portfolios, and insurers’ preference for senior positions contributes to the continued resilience of their CLO exposure.
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