By David Lawder
WASHINGTON, March 29 (Reuters) – The U.S. Treasury Department is expected to convene in coming weeks the first of a series of meetings with domestic and international insurance regulators about recent developments in jittery private credit markets, two sources familiar with the plans told Reuters.
Concerns over liquidity, transparency and lending discipline have rattled investor sentiment in the $2 trillion non-bank lending sector in recent weeks.
The sources said Treasury Secretary Scott Bessent had been planning since January, however, to start regular and sustained consultations with insurance regulators in the second quarter of this year.
The first of the meetings could be announced as soon as Wednesday, the sources said.
Based on the results of that meeting, the participants will determine the direction of future engagements, aiming to improve regulators’ fact-based, transparent oversight of private credit lenders as their interactions with regulated financial institutions increase.
The Treasury has no direct regulatory authority over the insurance industry but Bessent will seek to make the department a “convening authority, resource and forum” for all 50 U.S. state insurance regulators.
Treasury officials are keen to hear regulators’ feedback on the rising use of fund-level leverage, the consistency of private credit ratings, the use of offshore reinsurance, and the liquidity of investments in private credit markets, the sources said, adding that any policy prescriptions would only come after a series of consultations.
A U.S. Treasury spokesperson did not immediately respond to a request for comment.
During remarks to the Economic Club of Dallas in February, Bessent, a former hedge fund manager, said that when assets move from private credit lenders into regulated financial institutions, such as pension funds, banks or captive insurance companies, “Treasury gets involved.”
“I am concerned with watching, how does this get to the regulated financial system,” Bessent said.
He added that private credit lending had helped to bridge a gap in financing when regulators tightened controls on banks after the 2008-2009 financial crisis and again when bank lending froze during the COVID-19 pandemic, but he wanted to ensure that private credit lenders have “been prudent in their loan portfolios.”
“We want to gauge, could it have any effects on the overall economy? Thus far, it’s been very additive, but again, how does it affect the regulated system? And we want to prevent contagion.”
Bessent said individual investors through pension or 401(k) retirement accounts should be able to take advantage of private credit assets, but issued a warning that the Treasury Department was part of the process for regulating how private assets get transferred to individual investor accounts.
He said that the Trump administration would not allow working Americans’ savings and investment accounts to become “a dumping ground” for “rotten” assets.
(Reporting by David Lawder; Editing by Edmund Klamann)
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