It’s Only Money
Is There a Storm on the Horizon?
Given the headline, you’d think we were going to discuss the war in Iran. It’s related, but what concerns us is what is happening downwind.
We are talking about private creditand how it may impact your annuity. We are noticing movements in the private credit market which are reminiscent of what we saw circa 2008 in the mortgage-backed securities arena. We are not hearing other advisors, bankers, or regulatory agencies talking about problems in the private credit sphere.
With oil prices spiking, inflation concerns are real. Especially in the energy markets, which may as well be the entire economy, since everything is dependent upon energy. One of the major hogs of energy and its infrastructure is Artificial Intelligence along with the threats and promises associated with it.
As you are aware, new AI related companies have boomed. Most of these “new” companies are held privately, meaning they’re not publicly traded. They raise capital and funding through private investors and private loans, also known as private credit.
Well, if it’s all private and you don’t hold any private credit, how does this concern you? Let’s explore this question a bit further. (Spoiler Alert: This could affect your annuity.)
These loans are private in one sense, but the ramifications are far-reaching. Private credit is one of several "alternative asset class investments" where there is no regulatory agency reviewing or rating the quality of these loans. Those who historically invest in private credit understand the risks and illiquidity inherent to these investments. Investments in private credit are gambles. Investors and creditors require higher-than-normal returns with private credit because there is a risk of default even if all the other aspects of the investment appear solid.
In the latter half of 2025, rumblings about private credit could be heard. TriColor and First Brands made the news by defaulting on their loans and are accused of fraudulently promising the same collateral to multiple lenders. Usually when a company goes under, the creditors sell collateral to try to recapture some of their money. In these cases, they may as well be trying to sell a box of rocks.
Interestingly, many of these private lenders had received their funding from major banks: JPMorgan, Morgan Stanley, etc. Even though TriColor and First Brands were not related to AI or its infrastructure, they highlight the risk and the wild west attitude in private credit, as well as how they are intertwined with the larger financial system.
More recently, the companies making headlines in the private credit arena have been BlueOwl and Blackstone. These firms are dominant in the alternative asset investment arena and hold both private equity and private credit among other assets. Both firms have experienced write downs, have curbed access to investors, and raised concerns about the stability of the private credit system.
Here's where our concerns are interrelated. As a firm, we don’t utilize “alternative asset class investments”, due to the concerns like the ones discussed above. However, as history has shown, when major firms make a lot of money in a risky scheme, they love to suddenly “democratize” the asset and make it available to the public. Similar to buying a goldmine. Get the bulk of the gold out of the ground and sell it off as a profitable mine to some sucker. In a search for higher yield, these investments have found their way into pension funds and insurance companies offering annuities. In fact, some insurance companies are owned by private equity firms and have funds allocated into their own risky portfolios. Not too dissimilar from 2008, when bad loans and good loans were packaged together to give the impression of decreased risk.
You may not be shocked to discover that some insurance companies are holding private credit in their portfolio. But, when a company is owned by a private equity firm and their exposure is considerably greater than other insurance companies, my radar goes off.
U.S. life insurers like Security Benefit hold a record $1.8 trillion in private credit and equity (46% of their debt investments). That is a big chunk which is hard to turn into cash fast.
Reports from March 2026 have been highlighting the “hidden dangers” of significant private credit holdings by insurers. The Center for Economic and Policy Research warns that private equity-owned insurers use your annuity money for their own risky deals. This can create conflicts and big losses if defaults rise.
The Wall Street Journal just reported (March 5, 2026) that big private credit firms are seeing outflows over $1 billion and stock drops of 20%+. Experts call liquidity the "biggest concern" for these products.
Your annuities were supposed to be safe and simple. But when the insurance company is relying heavily on these illiquid, affiliated loans, the policy holders face a real risk of value drops, and trouble getting money out- or worse- in a downturn. The rating agencies are notoriously focused on backward-looking and current analysis and fail to be predictive. Experts say the current private credit weighting in annuities is untested in a very bad market — like pre-2008 warnings.
Is now a time to panic? No. But it is appropriate to evaluate your annuity and whether it is exposing you to more risk now than it did when you purchased it. You have choices for allocating the fixed income portion of your portfolio. Is it prudent to limit distributions to 10% per year from Security Benefit or is a more aggressive exit strategy superior? We are running break-even analyses to determine which approach we advise for each individual situation.
Every investment has tradeoffs. Annuities were utilized as a bond alternative several years ago because they were the safest harbor in stormy seas. But geopolitics, economic trends, and innovations shift the relative risks and benefits. Our strategy allows for changes in policy and adjusts your portfolio as technologies are adopted. Prudent planning and honest informed discussions are crucial to who we are at Resolute.
If you have questions or would like a review of your annuity, please give us a call or set up an appointment.
With Appreciation,
Patrick Volk and Joseph Stenard
Resolute Wealth Management