Munich Re said it has investments of as much as €2.5 billion ($2.9 billion) in private credit, an asset class that has been facing fund redemptions and scrutiny of underwriting standards.
Private credit “is about 1% of the asset portfolio of our entire group,” Chief Financial Officer Andrew Buchanan said in an interview with Bloomberg TV. “It is between about €2 billion and €2.5 billion, which for us is an incredibly digestible amount.”
Private credit has been rattled in recent months by concerns about overspending on artificial intelligence, the technology’s disruptive power and lending standards more broadly. Germany’s top financial regulator BaFin warned that some insurers have more than 25% of their investments in private debt, as it outlined plans to step up pressure on such firms to address shortcomings in their investments.
“We are keeping a close eye on these insurers, particularly their limit systems,” BaFin President Mark Branson told reporters on Tuesday in Frankfurt. “We have identified areas for improvement and will ensure that they take the necessary measures.”
Branson didn’t name any companies in his comments. On average, alternative investments account for slightly less than 20% of total investments at German insurers, of which a quarter is in private debt, he said.
Hannover Rueck SE, another German reinsurer, said Monday that its exposure to private credit funds is around 1% of its assets under management. When including direct infrastructure debt and highly rated CLOs, it’s ranging in the low single-digit billion euros, the company said.
Allianz SE has disclosed €141 billion in non-traded debt, of which 17%, or about €24 billion, was in areas such as middle market lending at the end of last year. The insurer has an investment portfolio of €753 billion.
Buchanan said Munich Re is investing in the senior secured end of the market, “through very carefully selected funds” that have “strong workout capabilities, should default rates start to tick up.”
“In terms of absolute exposure, it is very digestible,” he said. “We are going for the quality assets.”
Photograph: Munich Re CFO Andrew Buchanan; photo credit: Michaela Stache/AFP/Getty Images
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