Insurers Are Becoming Private Credit's Biggest LPs, One Rated CFO at a Time

TL;DR: Three private credit fund vehicles closed within about four weeks this summer, all built to sell rated debt tranches to insurance companies: Star Mountain Capital closed its Star Mountain CFO I around August 4, Churchill Asset Management and Temasek's Seviora Holdings closed a roughly $400 million collateralized fund obligation on July 13, and Onex closed its $500 million-plus Structured Credit Opportunities Fund II in early August. According to a BusinessWire announcement, the Star Mountain deal used Kroll Bond Rating Agency (KBRA) ratings and Evercore as placement agent to give insurers rated access to a $5 billion lower-middle-market lending platform. The common thread is regulatory, not just financial: National Association of Insurance Commissioners (NAIC) risk-based capital rules make a rated debt tranche dramatically cheaper for an insurer to hold than an unrated private fund interest, and issuers are racing to package private credit into a wrapper insurers can buy at scale.

I've watched private credit fundraising pitches for years, and most of them still lean on the same line: "insurance capital is coming." This summer, it arrived in a form you can actually point to. Three deals, three managers, one buyer base. If you want to understand why insurers are suddenly showing up as anchor investors in private credit funds, and why that access comes wrapped in a structure retail investors can't touch, you need to understand what a collateralized fund obligation actually is and why a regulatory capital rule is doing more to shape this market than any pitch deck.

What a CFO Is, and Why "Rated" Is the Whole Point

A collateralized fund obligation, or CFO, takes a pool of private equity or private credit fund interests, limited partnership stakes that would otherwise sit on a balance sheet as illiquid, hard-to-value assets, and repackages the cash flows into tiered securities. The top tiers, called tranches, get paid first and carry the least risk. The bottom tranche, called the equity or residual tranche, absorbs losses first and keeps whatever is left over. It's the same structural logic behind a collateralized loan obligation (CLO), just built from fund interests instead of individual corporate loans. If you're new to how tranching works, our guide to CLO mechanics and senior tranche protection covers the same waterfall concept from the loan side.

Here's why insurers care specifically about the "rated" part. An insurance company holding a private equity or private credit fund interest directly has to report it on a part of its statutory books called Schedule BA, which the NAIC treats as "other long-term invested assets." Schedule BA assets get capital-charge treatment closer to equity than to bonds, meaning an insurer has to hold more capital against them, dollar for dollar, than it would against a similarly-sized bond position. Slice that same private credit exposure into a CFO, get a rating agency to rate the senior and mezzanine tranches, and those tranches move onto Schedule D as bond-like instruments. Same underlying loans. Very different capital math.

That difference explains why insurers aren't just dabbling in private credit anymore. They're becoming its largest structural buyer. The NAIC's own Capital Markets Bureau data shows insurers' Schedule BA holdings grew 10.3% to $637.9 billion at year-end 2025, the first double-digit growth rate since 2021, and now represent 6.7% of the industry's $9.6 trillion in total invested assets. Life insurers hold about 65% of that pool. But that Schedule BA growth is the slow, expensive way to get exposure. The CFO wave is the fast, capital-efficient way, and three deals closing within weeks of each other tells you managers have figured that out at the same time.

Three Deals, Four Weeks: The Data

Here's how the three deals stack up. Two are structured explicitly as CFOs with rated tranches aimed at insurers; the third, Onex's fund, is a traditional CLO-equity and debt vehicle that signals the same institutional appetite even though it isn't marketed as a CFO.

Deal	Manager(s)	Size	Rating Agency	Arranger/Placement	Close Date (2026)	Structure Notes
Star Mountain CFO I	Star Mountain Capital	Not disclosed (rated tranches drawn against ~$5B lending platform)	KBRA (Kroll Bond Rating Agency)	Evercore	~August 4	Rated access to U.S. lower-middle-market direct lending funds
Churchill/Seviora CFO	Churchill Asset Management (Nuveen Private Capital) & Seviora Holdings (Temasek)	~$400 million	Not specified in issuer release	Not specified in issuer release	July 13	50/50 split: U.S. junior capital/secondaries and Asian private credit; oversubscribed
Onex Structured Credit Opportunities Fund II	Onex	$500 million-plus	Not applicable (traditional CLO equity/debt fund, not a rated CFO)	Not specified	~August 3-7	Global CLO equity and debt tranches; part of Onex's $32B credit platform

The Churchill/Seviora deal is worth sitting with for a second because of who bought it. Per Churchill's own press release, the roughly $400 million raise was oversubscribed, and demand was driven largely by U.S. insurers seeking highly rated fixed income. That's not a footnote. That's the buyer base identifying itself in the manager's own words. Churchill is Nuveen Private Capital's direct lending arm, backed by TIAA, and Seviora is the private markets arm of Singapore's Temasek, pairing a U.S. insurance-affiliated lender with an Asian sovereign-linked platform to split the deal 50/50 between U.S. junior capital and secondaries on one side and Asian private credit on the other. Arcmont Asset Management, also under the Nuveen/TIAA umbrella through its European direct lending business, sits in the same corporate family tree as this deal, another sign of how consolidated the insurance-backed private credit supply chain has become.

The NAIC Mechanism: Why a Bond Wrapper Beats a Fund Interest

Risk-based capital, or RBC, is the NAIC's formula for how much capital an insurer must hold against each category of asset it owns, calibrated to that asset's risk. Bonds get relatively low RBC charges because they have defined maturities, contractual cash flows, and (usually) a credit rating from a recognized agency. Equity-like and alternative assets get much higher charges because they're harder to value, more volatile, and less liquid.

This is the mechanism driving the entire CFO boom: a rated senior CFO tranche gets treated like a bond under RBC and lands on Schedule D. An unrated LP interest in the exact same underlying credit fund gets treated like an alternative asset under Schedule BA and carries a materially higher capital charge. For a life insurer managing capital against billions of dollars in liabilities, that difference compounds. Multiply it across a multi-hundred-million-dollar allocation and the capital savings from buying the rated tranche instead of the raw fund interest becomes a return driver in its own right, independent of the coupon.

Regulators noticed the arbitrage and pushed back, at least partially. In 2024, the NAIC raised the Life RBC factor for residual and equity-tranche asset-backed securities from 30% to 45% on an interim basis, a change Mayer Brown's NAIC investment-developments briefing and Willkie Farr's NAIC Task Force analysis both describe as targeted specifically at curbing what regulators called "regulatory arbitrage" in CFO and CLO structures. The hike hits the bottom of the capital stack, the equity/residual tranche, hardest, which is exactly the piece that absorbs first losses and offers the richest returns. It does not touch the senior and mezzanine rated tranches insurers are actually buying in these three deals. That's a meaningful distinction: regulators tightened the screw on the riskiest slice of the structure while leaving the investment-grade-rated slices, the ones driving this fundraising wave, largely intact.

Who's Building These Deals

Star Mountain Capital, founded by Brett Hickey, runs the lower-middle-market direct lending platform behind Star Mountain CFO I, a roughly $5 billion set of funds now getting a rated wrapper via KBRA ratings and Evercore's placement work. Churchill Asset Management, led by Ken Kencel and operating as Nuveen Private Capital's direct lending business, partnered with Seviora Holdings, the private markets arm Temasek built under CEO Gabriel Lim, to combine U.S. and Asian private capital strategies into one $400 million structure. Onex, running a credit platform with roughly $32 billion in assets, closed its Structured Credit Opportunities Fund II to buy CLO equity and debt tranches globally, according to Alternative Credit Investor's reporting.

On the rating and infrastructure side, KBRA rated the Star Mountain deal, joining S&P Global Ratings and Moody's as the agencies active across this market's growing rated-tranche supply. Evercore placed the Star Mountain tranches. And behind all of it sits the NAIC's own machinery. The Securities Valuation Office (SVO) assigns designations to insurer-held securities. The Credit Rating Provider (E) Working Group vets which rating agencies' opinions insurers can rely on for capital purposes. And the Risk-Based Capital Investment Risk and Evaluation (E) Working Group is actively rewriting how these structures get charged capital. Every one of those bodies has a live workstream touching CFOs right now.

The Honest Caveat: Regulators Are Watching Their Own Loophole

I'll say this plainly because the research supports it and because I think readers deserve the unhedged version: the NAIC did not stumble into this. It knows insurers are using rated tranches to get bond-like capital treatment on assets that behave nothing like investment-grade corporate bonds, and it built new oversight specifically to police it. Beyond the residual-tranche RBC hike, the NAIC has stood up a formal CRP (Credit Rating Provider) Due Diligence Framework and an RBC Model Governance Task Force, both aimed at scrutinizing how rating agencies model these structures and whether the resulting ratings deserve the capital treatment insurers are getting.

What that means for durability: this is not a closed loophole, but it is an open regulatory conversation, and the direction of travel over the past two years has been toward tighter scrutiny, not looser. The NAIC's principles-based bond definition project, which is separately reshaping what qualifies as a "bond" for RBC purposes, cuts both ways here. It can formalize a path for well-structured rated CFO debt to keep qualifying for bond treatment, or it can narrow the definition in ways that catch structures regulators view as engineered primarily for capital relief rather than genuine credit investing. Either way, the senior and mezzanine tranches in these three 2026 deals were structured under the current rules, and any future tightening would apply prospectively, not retroactively strip existing capital treatment. That's a real distinction for anyone trying to judge whether this trend has staying power or is a temporary arbitrage window. My read: the fundraising volume and the oversubscription on the Churchill/Seviora deal both suggest insurers believe the current treatment holds for a while yet, but "regulators are actively building tools to scrutinize this" is not a detail to skip past.

What This Means If You're Not an Insurance Company

You can't buy into Star Mountain CFO I, the Churchill/Seviora structure, or Onex's fund. These are institutional placements, sized and structured for insurance company balance sheets, sold through private placement channels an individual accredited investor doesn't have access to. So what can you actually do with this information?

First, recognize what the trend tells you about where institutional capital is flowing. When insurers, arguably the most capital-discipline-obsessed buyer class in finance, pour billions into rated private credit paper because the RBC math works, that's a signal the underlying private credit market is maturing into something regulators and rating agencies are comfortable underwriting at scale. That same underlying momentum shows up in other corners of private credit fundraising. European direct lending, for instance, has been pulling in similar institutional weight, as we covered in our look at Bridgepoint's $5.1 billion Direct Lending IV close.

Second, look at the adjacent vehicles built for accredited (and in some cases non-accredited) investors that hold economically similar underlying credit. Business development companies, or BDCs, are publicly registered vehicles that make direct loans to middle-market companies, many of the same borrower profiles that sit inside funds like Star Mountain's lower-middle-market platform. Interval funds, which are registered funds that offer periodic (not daily) redemption windows, have become a common wrapper for retail and accredited investors to access private credit and even CLO tranches without needing an insurance-company-sized check or a private placement memorandum. Neither vehicle gives you the exact rated-tranche structure or capital treatment insurers get, and neither should be confused with the safety profile of a highly-rated CFO senior tranche. But both give you a way to participate in the same lower-middle-market and direct-lending credit that's fueling this entire trend, with daily or periodic liquidity mechanics built for individual investors rather than balance sheets measured in the billions.

Before committing capital to either, do the same homework an insurer's investment committee would do: understand the fee load, know exactly what's in the loan book, check the manager's track record through at least one credit cycle, and read the redemption terms closely, because "interval" liquidity is not the same as daily liquidity. Private credit defaults are cyclical, not zero, and a rated tranche's protection comes from subordination beneath it absorbing losses first, a structural feature retail-accessible vehicles often replicate imperfectly, if at all.

Author Disclosure: Jeff Barnes, MBA has no personal position in any company, fund, or platform named in this article. Angel Investors Network has no current commercial relationship with any party mentioned. AIN provides marketing and education services, not investment advice. Past performance does not guarantee future results. All investments involve risk, including loss of principal.