A ‘democratised’ financial crisis is still a crisis

August 24, 2026 - 05:09

The rapid growth of private credit has been hailed as a democratisation of finance, opening doors for everyday investors to access yields once reserved for big institutions. But a closer look at who is actually funding these loans reveals a troubling shift. Insurance companies, particularly those offering fixed-index annuities to retail customers, have become the biggest buyers of private credit debt. While this sounds like a win for the little guy, the reality is that the risks are being quietly repackaged, not eliminated.

The problem is liquidity. Private credit assets are inherently illiquid, meaning they cannot be easily sold in a pinch. Insurance policies, however, promise policyholders that they can cash out, often with penalties, but still within a reasonable timeframe. This mismatch creates a fragile structure. If a wave of policy surrenders hits at the same time the economy sours, insurers could be forced to sell other assets at a loss or scramble for emergency funding. The crisis would not be a dramatic bank run, but a slow, grinding squeeze that hits the most vulnerable investors last.

This is not a call for panic, but for honest accounting. The democratisation of finance should not mean shifting complex, opaque risks onto people who lack the tools to assess them. Regulators need to look past the glossy marketing and question whether the insurance boom is building a house of cards. A crisis democratised is still a crisis, and it will hurt those who were promised safety first.