Over the past decade, the relationship between private credit and insurance has largely been understood through the lens of asset gathering. Insurance companies hold large pools of long-duration capital, and alternative asset managers have increasingly sought to manage those assets, acquire those liabilities or partner with insurers to access stable, permanent capital. That model has been highly successful, helping reshape parts of the alternatives industry and providing access to large, durable pools of long-duration capital. For many managers, insurance has become synonymous with permanent capital and AUM growth. The European MGA market now exceeds €20 billion of annual premium, highlighting the growing scale of specialist underwriting across the region (Howden Re, 2025).

However, this framing risks obscuring a different and, in my view, increasingly important opportunity. Insurance should not only be understood as a source of capital for private credit strategies. In certain specialist markets, insurance can be the investment strategy itself. That distinction matters. The first model is primarily about managing assets backing insurance liabilities. The second is about underwriting risk, structuring complexity and earning returns from specialist insurance markets where expertise, judgment and access can matter more than scale alone.

The most interesting parts of this market are not life insurance, annuities, catastrophe risk or commoditised consumer insurance. Those are large and important sectors, but they are not where I see the clearest opportunity for institutional capital seeking underwriting-led returns. The more compelling area lies in specialist, non-catastrophe lines such as after-the-event insurance, contingent risk, tax insurance, warranty and indemnity insurance, surety and selected credit-related products. These are markets where risks are bespoke, outcomes are idiosyncratic and successful underwriting requires a level of expertise that cannot easily be automated or commoditised. While individual specialist lines may appear niche in isolation, collectively they form part of a substantial global specialty insurance market, benefiting from structural growth drivers including rising transaction activity, increasingly complex regulatory environments, greater use of litigation finance and growing demand for bespoke risk-transfer solutions in corporate and private capital markets.

A crucial point is that buyers in these markets are often purchasing insurance for reasons that go beyond a simple expected-value calculation. Buyers frequently use insurance to facilitate transactions, manage legal uncertainty, satisfy lenders or release trapped capital. In each case, the value of the insurance is not limited to the probability of a claim. It lies in the commercial outcome the policy enables: certainty, liquidity, execution or risk transfer.

That distinction is central to the economics of specialty insurance. In more commoditised markets, pricing tends to converge towards expected loss plus expenses and capital cost. In specialist markets, the buyer may be solving a broader commercial problem, which can allow disciplined underwriters to earn attractive economics where the underlying risk is well understood. The opportunity is not that these risks are risk-free; it is that they can be mispriced or underserved when the market lacks the expertise, capital or appetite to assess them properly.

The opportunity in fragmented markets

Europe is an especially interesting environment because the market remains fragmented. European MGA premium has been growing at approximately 15% annually, reflecting increasing demand for specialist underwriting capabilities (Howden Re, 2025).

Specialist underwriting expertise is often found in small MGAs, local platforms and niche teams that possess strong technical capabilities but lack the capital or infrastructure required to scale. As investors have seen elsewhere in European private credit and other fragmented markets, this combination of local expertise, operational complexity and information asymmetry can create attractive opportunities for those able to aggregate and support specialist businesses. In specialty insurance, the most valuable asset is often not the balance sheet itself but the underwriting expertise that originates, assesses and prices risk, making underwriting capability a far more important determinant of value than scale alone.

Insurance as a strategy, not a source of capital

This is also where the comparison with traditional insurance-led private credit strategies becomes important. Many alternative asset managers use insurance to create or access large pools of assets to manage. The insurance company effectively becomes a source of permanent capital, while the manager earns fees by investing those assets into credit portfolios and other alternative strategies. 

The opportunity I am describing is fundamentally different. The objective is not simply to accumulate liabilities in order to invest the float. The objective is to own and control the underwriting economics of specialist risk, supported by appropriate capital, governance and investment management. Returns are generated through underwriting profitability, specialist origination and disciplined risk selection, with investment income acting as an additional contributor rather than the primary driver of value creation.

This distinction may appear subtle, but it has important implications for investors. In the traditional insurance asset-management model, scale is often the key determinant of economic success. In specialist insurance, expertise is the scarce resource. The value lies in understanding risks that others cannot analyse effectively, structuring solutions to complex problems and maintaining the discipline to participate only where the risk-adjusted economics are attractive.

What this means for institutional investors

For institutional investors, the potential appeal lies in the combination of several return sources: underwriting profit, fee income from origination and servicing, and investment income on premiums held before claims are paid. More importantly, those returns are generated by a set of drivers that are often distinct from traditional fixed income and private credit exposures. The underlying disciplines will feel familiar to experienced credit investors: assessing downside risk, understanding legal documentation, evaluating recoveries and pricing complexity. However, the return profile is distinct from that of traditional private credit. 

Specialty insurance should not be viewed as a replacement for private credit, but as a complementary strategy. Both disciplines rely on underwriting expertise and rigorous risk analysis, however specialty insurance introduces exposure to different underlying risks, creating potential diversification benefits within alternative portfolios.

In an environment where capital is abundant and many alternative strategies are increasingly crowded, genuine differentiation is increasingly difficult to find. Specialty insurance is not without risk, but it remains one of the few areas where expertise, judgment and underwriting discipline can still create a meaningful competitive advantage. For institutional investors seeking differentiated sources of return, it is an opportunity worthy of serious consideration.

Reference

Howden Re (2025) Filtered for Quality. London: Howden Re.
 

A crucial point is that buyers in these markets are often purchasing insurance for reasons that go beyond a simple expected-value calculation.