NEW YORK, June 10 - Private credit has become a crucial tool for insurance companies seeking the returns needed to satisfy policyholder obligations, and heightened regulatory attention should ultimately benefit the sector, Ares Management's chief executive said on Wednesday.
"Insurance companies need private credit," Michael Arougheti told attendees at the Morgan Stanley US Financials conference in New York. He argued that, given the necessity of generating excess returns and the current scale of traded markets, insurers increasingly depend on private lending to meet their investment objectives.
Supporting that observation, ratings firm and insurance industry specialist AM Best has reported that U.S. life and annuity insurers more than doubled their private credit holdings over the last 10 years, a period when official interest rates were unusually low. That shift toward less-liquid instruments has drawn regulatory attention.
U.S. Treasury secretary Scott Bessent has engaged with state insurance commissioners to discuss ways to strengthen oversight amid questions on transparency, lending discipline, and a withdrawal by wealthy investors from funds that provided exposure to these infrequently traded assets.
Arougheti welcomed the scrutiny. "Regulation does not mean bad," he said, noting that as insurers deepen their allocations to private markets, regulators will reasonably seek clearer information on deal structures and performance metrics. "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 added.
The CEO's remarks underline two concurrent trends: a growing allocation to private credit by life and annuity carriers, and a parallel increase in regulatory focus intended to address market and investor concerns. Arougheti framed this oversight as a corrective that can help improve disclosure and lending standards without labeling regulation as inherently negative.
While Ares Management Corp Class A was referenced in market commentary around the event, the core message from Arougheti centered on the strategic role private credit now plays for insurers and the expectation that greater visibility into private market operations will follow more active supervision.
Impacted sectors: Insurance, private credit funds, broader financial markets.