The Insurance View on Private Credit

It’s no secret: the private credit market continues to expand, and the landscape in which both investors and borrowers seek alternative sources of capital has firmly established itself as a leading force within the broader alternative’s ecosystem. The speed, flexibility, and structural creativity of private credit have unlocked new opportunities for managers and their LPs alike.

But as private credit has surged, how has the insurance industry responded? And what exactly are Asset Management D&O, E&O, and EPL underwriters looking for in a credit manager’s submission? To answer these questions, it helps to first outline the core liability exposures tied to credit strategies:

• Loan underwriting & due diligence failures (E&O)
• Valuation errors or mispricing of risk (E&O)
• Misrepresentation in offering materials or investor reporting (E&O/D&O)
• Breach of fund mandates (E&O/D&O)
• Regulatory inquiries, exams, or enforcement actions (D&O)
• LP communications or disclosure disputes (E&O/D&O)
• Mismanagement or breach of duty by GP (D&O/E&O)
• Employee Disputes (EPL)
• Fraud or theft, including wire fraud and social engineering (Crime)
• Data breaches involving firm or borrower information (Cyber Liability)

Over the past 24 months, the E&O market has broadened significantly, with most fund managers seeing material premium reductions or, at worst, flat renewals. Despite the market softening, carriers are still selective in deploying capacity. Underwriters continue to scrutinize DDQs and supporting documents to understand how a manager approaches loan origination, collateral analysis, monitoring borrowers and accurate valuations.

Because these activities involve subjective judgement and inherently higher error risk, E&O carriers focus heavily on the strength of the managers underwriting discipline, documentation standards, valuation methodology, and portfolio concentration limits. Stronger internal controls and consistent processes often result in improved pricing and deductible outcomes.

Ultimately, securing the best terms in today’s marketplace boils down to two factors: 1) ensuring your submission is placed in front of a carrier best aligned with your strategy, and 2) working with a broker who truly understands your fund’s operations, risk profile and investment approach. When those elements come together, one should be able to capitalize during a highly favorable insurance environment.

Golsan Scruggs is an insurance brokerage firm operating throughout the United States, specializing in liability insurance for fund managers. As one of the largest insurers of asset managers in the U.S., we have a dedicated staff of private fund insurance specialists that understand the risks of the financial services industry and deliver superior results. We make the underwriting process painless.

At Golsan Scruggs, we believe it is incumbent upon us to earn the right to be appointed as your insurance and risk-management agent. Our underwriting process exists to serve that purpose.

Our review will analyze your fiduciary exposures, provide rate details and comparisons, and provide a contract comparison. No application required.

To obtain your complimentary review, please provide the following information or contact us at (800)273-5883. Fields marked with * are required.