A big, overlooked risk in private credit is coming from the life insurance industry, investors and economists warn.

Why it matters: Life insurance, particularly the annuities that people buy to fund their retirements, could be the vehicle through which the pressures on private credit actually affect the lives of real people.

State of play: Stress is building in private credit — or nonbank lending.

• An increasing share of investors in private credit funds are looking to get their money out.
• Redemptions at business development companies, which invest in small and medium-size private firms, are rising, notes a report from Bloomberg Intelligence.

Zoom out: That distress is raising concerns about the private credit market overall — which is much bigger than BDCs alone.

• In fact, some of the biggest players in the market are life insurance companies.
• They invest in private credit to earn enough return to pay the people who buy insurance and annuities.
• Over the past few years, insurance has become the "lifeblood" of private credit, as the Financial Times put it earlier this year.

By the numbers: Data is hard to come by, but one estimate from researchers last year at the Chicago Fed finds that life insurer investments in private credit reached $849 billion in 2024 — that's more than double what it was in 2014 and close to half of the $1.8 trillion sector.

Zoom in: Private equity firms have gotten into the insurance business, driving up the industry's exposure, as the Fed report notes.

• Both Apollo Global and KKR have insurance arms that are investing in private market debt, while Blackstone is a huge manager of insurance companies' portfolios.
• There are also smaller, less well-known firms that have followed these big guys into the insurance business — and are causing worries.

Friction point: The big issue is with annuities: Regular folks buy these from insurers, handing over a chunk of their savings, and in return they are assured a steady retirement benefit.

• The exposure to private credit that individual retirees have through their annuities is a "big problem," says Andrew Milgram, managing partner and chief investment officer for Marblegate Asset Management, an opportunistic credit and special situations investment firm.
• He warns of a potential "doom loop" — where concerns over the market lead retirees to terminate, or "surrender," their annuities, creating more private credit distress and leading to more withdrawals.

Reality check: While Cassandras like Milgram issue warnings, those in the industry say that insurers invest in very safe private assets, unlike the software loans most at risk in the current private credit upheaval.

• "We're trying to find the safest investment possible for insurers," a source in the credit industry tells Axios. "It's misleading to say insurers are being pushed into risky assets."
• "The vast majority of private credit is private investment-grade credit which helps to generate high-quality yield and retirement income for families and savers across the country," says Apollo in an explainer, which notes that it's a massive market and that private debt is on the balance sheets of pensions and banks, too.

Threat level: The private market is opaque, however, and it's simply hard to assess the risk.

• "The lack of transparency surrounding private credit funds makes it impossible to evaluate just how vulnerable they are," economist Eileen Appelbaum wrote in a recent analysis for the Center for Economic and Policy Research.

Yes, but: Asset managers continue to say that the turmoil in the space is driven mostly by investor anxiety, specifically in "semi-liquid" private credit funds, and that retail investors didn't understand the risks they were taking on.

• "A lot of the selling that's happening right now in the private credit space is being driven by fear, rather than the fundamentals," says Aaron Mulvihill, a global alternatives strategist at JPMorgan Asset Management.

The bottom line: Fear over private credit is raising questions about exposure in the life insurance industry.

The spot price of a barrel of Brent crude oil — the actual stuff that producers sell to buyers — has doubled since the Iran war started to $141.37, its highest level since July 2008 in the run-up to the financial crisis, according to Platts, which tracks the data.

Why it matters: It's a sign that the disruption of the Iran war is already causing huge stress in oil markets.

• That stress has not been fully reflected in the oil futures market, which has been getting all the attention in recent weeks.

Zoom in: One-month Brent futures were trading at around $109 a barrel yesterday. And futures with longer contracts were still trading below $100 a barrel.

Catch up quick: Oil futures are contracts that investors buy to hedge against price fluctuations. Hedge funds, retail and institutional investors, pension funds, etc. — they're all out there buying futures. It's just paper, not actual oil.

• The dated Brent crude oil price (charted above) is paid by those who are buying the physical commodity "on the spot."

The big picture: There are not enough barrels for everyone, so refineries in Asia are desperately buying product from wherever they can get it — and paying a big premium.

• "The physical crude market is telling a story that the futures strip is refusing to price in," per a note from Rystad Energy yesterday.
• "On one side, the forward curve is still signaling a relatively healthy environment."
• "On the other side, the physical market tells another story — one of severely strained oil supply, with refiners fighting over the same barrels that have now skyrocketed in value."

The bottom line: There's nothing inherently wrong with the disconnect, writes Robin Brooks, a senior Brookings fellow, this morning. "Futures markets naturally embed expectations of when the war ends. Maybe those are wrong, but that's exactly what futures markets are supposed to do."

Market volatility seems to be a thing these days, yet a gauge of it is saying: eh, not so much.

The big picture: Wall Street's fear gauge, the CBOE Volatility Index or VIX, has stayed relatively calm given the shocks tied to the Iran war that have provoked rapid swings in stocks.

Zoom in: A reading above 20 in the VIX — which uses options prices to measure the expected volatility of the benchmark S&P 500 index — signals heightened market turmoil.

• Yet the index in wartime has not been significantly higher than it was in the late fall, when the market worries were largely about the AI boom and interest rates.
• And the index is far from the elevated levels reached a year ago amid the surprise of Trump's "Liberation Day" tariffs.