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The Unpublished Grade: How Private Letter Ratings Came to Certify Insurers’ Trillion-Dollar Private Credit Expansion—and What Institutional Investors Must Demand Before They Trust the Next Investment-Grade Label

"In June 2024, the Capital Markets Bureau of the National Association of Insurance Commissioners—the standard-setting body behind state insurance regulation in the United States—published a special report on the private ratings spreading through American insurers’ bond portfolios. Its analysts had examined 109 private credit securities that the NAIC’s own Securities Valuation Office had previously assessed and that later received confidential ratings from commercial rating agencies. The comparison produced one of the most lopsided data sets a financial regulator has published in years: 106 of the 109 securities, roughly 97 percent, carried a private rating higher than the SVO’s original assessment.¹ Of the securities rated higher, thirty-eight—36 percent—were more than three notches above the regulator’s view. Eight sat six or more notches higher, the distance separating a speculative single-B credit from an investment-grade triple-B, and every one of those eight ratings had been issued by a smaller rating agency.¹"

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