The US insurance industry’s pursuit of yield continues to drive shifts in asset allocation, but a sweeping set of regulatory reporting changes has fundamentally altered how market participants compile and analyze those portfolios.

The 2026 US Insurance Investments Market Report, newly released by S&P Global Market Intelligence, tracks the evolution of the property and casualty and life sectors' asset allocation strategies through the end of 2025. Total cash and invested assets across both sectors climbed to approximately $8.68 trillion at year-end 2025, with life general accounts reaching $5.97 trillion (a 6.2% increase) and P&C industry totals advancing 8.1% to $2.71 trillion.

While macroeconomic volatility and interest rate dynamics played a significant role in investment performance, the implementation of the National Association of Insurance Commissioners' Principles-Based Bond Definition (PBBD) project and an overhauled Schedule D reporting framework served as the defining structural shifts for the industry.

The report further highlights the multiyear migration into private credit and alternative assets across sectors and corporate structures, which continues as carriers face increasing competitive pressure to drive investment returns above and beyond market benchmarks. It also examines the associated risks of that transition, which are not limited to liquidity, complexity and, in some cases, convexity, but also include mounting headline risk amid relentless media reporting on the potential ramifications of these new approaches to portfolio management.

Divergent asset allocation trends across life and P&C

The multiyear migration toward higher-yielding alternative asset classes and private markets remained firmly intact through 2025, though the execution continues to diverge based on sector liability profiles.

In life general accounts, bonds remained the dominant asset class at $3.99 trillion, but their relative allocation edged down to 66.8% from 67.4% a year earlier—extending a decade-long trend that has seen bonds' share fall nearly 7 percentage points from 73.7% in 2015. Life insurers continued to lean into private credit, with privately placed bonds rising to a record high of 48.4% of total life industry bonds, up from 37.4% five years prior. Concurrently, Schedule BA assets—which capture private equity, hedge funds, and collateral loans—grew to $409 billion (6.9% of invested assets). Mortgage loans held steady at 13.9% ($832 billion), bolstered by a sharp 32.6% expansion in uninsured residential whole loans as carriers willingly traded convexity risk for yield pick-up.

For the P&C sector, portfolio reallocation toward alternatives proceeded at a more measured pace, reflecting shorter-tail liability structures and higher liquidity requirements. Excluding Berkshire Hathaway Inc., P&C bond allocations fell by 88 basis points in 2025 to 68.6% (down 294 basis points over ten years). Beneficiaries of this shift included common equities, which rose to a four-year high of 16.2% of total assets on stock market appreciation, and Schedule BA holdings, which reached a record 7.1% of invested assets. P&C allocations to NAIC-defined private bonds also reached an all-time peak of 23.2% of total bond holdings.

PBBD implementation and reclassifications

The Jan. 1, 2025, effectiveness of the new definition for what constitutes a bond had a profoundly divergent impact across the industry. For life general accounts, the report estimates that nearly $15.40 billion in assets were transferred from Schedule D, Part 1 to other investment schedules as the PBBD came to fruition. Lincoln National Corp. accounted for more than one-quarter of these transfers, largely driven by new and additional investments categorized as debt securities without a creditor relationship in substance on Schedule BA. Preferred stock on Schedule D, Part 2 and capital notes on Schedule BA also served as top landing spots for former bonds, reflecting the shift of bank junior subordinated debt.

The PBBD's impact on P&C portfolios was much more muted, though still notable. The report estimates that approximately 650 bonds valued at $1.81 billion shifted to other investment schedules, with $1.14 billion moving to Schedule BA and $656 million transferred to preferred stock. Erie Insurance Exchange Group and Philadelphia Contributionship Insurance Co. saw some of the most significant effects from these reclassifications.

Schedule D overhaul and transparency

Beyond the PBBD, the NAIC’s overhaul of Schedule D, Part 1 has ushered in increased transparency while simultaneously creating challenges for year-over-year allocation comparisons. The new framework breaks bond holdings into two broad categories: issuer credit obligations and asset-backed securities (ABS). Within the nearly $4 trillion US life general account bond book, this split settled at 72.8% to 27.2%, respectively. The corporate bucket continues to dominate, accounting for 74.1% of total issuer credit obligations and representing the largest single concentration in the industry. For P&C insurers, the sector showed a roughly equivalent split between government and corporate issues under the new framework.

Finally, regulators have expanded their line of sight into the nature of underlying risks and complex structures. New Schedule D reporting and expanded disclosures on Note 5 of annual statements have provided a clearer view of related-party investments, particularly regarding funds held by cedants as collateral for coinsurance and modified coinsurance (modco) contracts. The data reveals a much higher prevalence of related-party investments in modco and funds withheld accounts, giving regulators greater ability to assess the associated risks of asset-intensive reinsurance models, though their ability to conduct more comprehensive loan- and security-level analyses remains subject to further rulemaking.

As insurers continue to navigate an unsettled macroeconomic landscape, these enhanced disclosures will provide vital transparency into the ongoing transformation of US insurance company balance sheets. But as a crowded agenda for the NAIC's Financial Condition, or "E" committee, demonstrates, there remains considerable work to do given the rapid evolution of industry investment strategies.