ECB Analysis: European Insurers Face Larger Private Credit Losses Than Banks in Stress Scenarios

The European Central Bank (ECB) has published a detailed stress analysis of private credit exposures within the eurozone financial system, with findings that specifically highlight the vulnerability of European insurance companies to a deterioration in private lending markets. The analysis, which fed into the European Supervisory Authorities' (ESAs) Joint Committee Spring 2026 update on risks and vulnerabilities in the EU financial system, concludes that insurers would face the largest absolute impact in a private credit shock scenario — larger than banks.

The reasoning is structural. European insurers hold private credit positions that are both larger in size and less senior in ranking than those held by banks, meaning they have less priority in the capital structure in the event of borrower defaults. Additionally, their equity holdings suffered more from the broader market repricing that accompanied recent stress events. Banks, by contrast, tend to hold more senior loans to private credit funds, which provides a buffer against full principal loss. The ECB estimated that private credit funds managed from the eurozone held approximately €100 billion ($116 billion) in assets.

Bank of America analysts, in a separate assessment cited by the ECB's broader risk framework, estimated that European insurers hold an average of 11% of their general account investments in private credit and private equity combined. When all private assets are included — mortgages, private lending, securitised products, real estate, and private equity — the average exposure rises to 27%. Stress test modelling assuming elevated default rates across private assets suggested potential losses equivalent to approximately 4% of the sector's total market capitalisation, a level that is 'likely manageable given insurers' strong capital positions,' according to the BofA analysis — but notable nonetheless.

The concern is particularly relevant in mid-2026 because the Iran conflict's economic consequences are co-mingling with pre-existing private credit cycle worries. In Q1 2026, several flagship US semi-liquid Business Development Company (BDC) private funds experienced redemption requests above their stated limits — a warning sign that private credit stress can materialise rapidly. A viewpoint article published on June 11, 2026, in Insurance Journal noted that the first quarter was 'eventful, with the Iran conflict co-mingling with market concerns over the private credit exposures held by both European banks and insurers,' and that Zurich Insurance is actively managing this dynamic alongside its recent Beazley acquisition.