Short selling in US life insurers tops $5bn in 2026

What changed in the life insurance trade

Short sellers’ bets against U.S. life insurance stocks have more than doubled over the past year to above $1 billion, according to a Reuters analysis of ORTEX data. The buildup in bearish positioning has coincided with rising scrutiny of insurers’ exposure to private credit, an asset class where valuations can be less transparent than public bonds. Market participants have pointed to recent concerns in private credit after portfolio managers were found to hold debt from bankrupt auto firms and a UK mortgage provider accused of fraud. Analysts cited by Reuters said the move is not just about a single credit event, but about broader structural risk and disclosure.

Why private credit is at the center of investor concern

Private credit refers to loans made by non-banks such as private equity funds and asset managers. It has expanded rapidly over the last decade, partly because it sits outside the traditional banking system. Mediolanum International Funds head of fixed income Daniel Loughney said concerns relate to structural vulnerabilities and lower regulation and oversight compared with banking. He added that institutional exposure has grown significantly, and that the issue could affect life assurance markets, annuity markets and asset management.

How big is insurers’ private lending exposure

AM Best said private credit holdings among U.S. life and annuity insurers more than doubled over the last 10 years, during a period of historically low official interest rates. The International Monetary Fund, citing Moody’s data, reported that U.S. life insurers have roughly 35% exposure of their balance sheet tied up in private lending. Insurers typically use longer-duration assets to match long-dated liabilities such as annuities, and private credit can offer higher yields and steady long-term returns. But the same features that make private assets attractive can also make them harder to value during periods of market stress.

The short-selling numbers behind the shift

Reuters calculations based on ORTEX data show traders added almost $1 billion to the value of short bets on 10 top U.S. life insurance companies over the past year. That took the total to around $1.3 billion. ORTEX data also showed a more than 130% increase in the proportion of stock borrowed to establish short positions in those names.

Beyond insurers’ own balance sheets, Reuters noted that concerns have also been reflected in outflows from retail funds that package private loans to middle-market companies and trade on public exchanges. Questions about the valuation of underlying loans have been raised, including loans made to AI infrastructure companies, amid whipsawing tech markets.

Sector performance signals investor caution

The S&P 500 U.S. insurance index has fallen almost 5% so far this year, Reuters reported, versus a 4.7% rise for the broader S&P index. Barclays analysts estimated that the collective earnings per share of 15 U.S. life insurance companies will drop by almost 7% over the course of this year. Barclays said markets appeared to be pricing in a “fairly severe” outcome, including either a recessionary backdrop or losses within private credit portfolios, while also adding that these concerns were overdone.

Global positioning: short bets broaden beyond the US

Reuters calculations using S&P Global and LSEG data showed that the value of short bets against global insurance firms grew by more than 60% in the 12 months to April 15, to over $11 billion. ORTEX data cited by Reuters showed short positions in Principal Financial Group rose more than 80% in the past year and hit a peak of over 4% in March. Bets against Brighthouse Financial reached a record high of over 13% of available stock on March 9. Principal and Brighthouse declined to comment, Reuters reported.

Prudential was the only company noted as commenting, with short positions rising to 3.27% from 1.96%. Prudential said it does not comment on market activity and remains focused on disciplined risk management and long-term value creation.

Transparency and captives: the recurring flashpoint

Barclays said in a separate note dated April 20 that for most insurers the issue was more about transparency than acute credit issues. Tom Gober, a U.S.-based former insurance examiner who has testified before Congress and U.S. regulators and advises hedge funds, calculated that insurers have made about $1.54 trillion worth of transactions into opaque subsidiaries called captive insurance companies. Gober said recent U.S. regulatory changes would not go far enough to fix the lack of transparency, especially for offshore holdings. He argued that markets may respond by shorting parent companies.

Alberto Gallo, founder of hedge fund Andromeda Capital, said life insurers owned by private equity firms are “very long private assets” and have “very limited capital surplus available.” Reuters reported that Andromeda holds bets against insurers’ bonds.

Key figures at a glance

India context: why global disclosure debates still matter

While the Reuters report focuses on U.S. insurers, the broader theme of alternative assets, valuation uncertainty and disclosure has also been highlighted by global bodies referenced in the provided material. The International Association of Insurance Supervisors, in its Global Insurance Market Report 2025, flagged potential systemic risks from global life insurers’ growing allocation to alternative assets such as private credit, describing them as having valuation uncertainty, illiquidity and complexity. The Bank for International Settlements also warned that increased investments in opaque assets can pose financial stability risks because they are difficult to value and can face liquidity stress.

In India, the material provided also described how policy and profitability drivers can quickly change investor expectations for life insurers. A government GST exemption on life insurance premiums announced in September was followed by strong new business momentum in November, with private players reporting 26% growth in individual new business premium. Retail new business premium grew 23% year on year across October and November, while year-to-date retail new business growth was 9.8%, with LIC at 8.8% versus private insurers at 12.2%. Analysts cited in that section also warned that the loss of input tax credit could reduce industry margins by about 2 to 4 percentage points.

Market impact and what investors are watching

For U.S. life insurers, the reported build-up in short interest signals that some investors want clearer disclosure around private credit holdings and captive structures, not just credit performance. The gap between the insurance index’s decline and the broader market’s rise underscores how quickly valuation and transparency concerns can affect sector sentiment. With Barclays highlighting both a potential EPS decline and the possibility that pessimism is “overdone,” the key near-term debate is whether markets are pricing genuine credit losses, a transparency discount, or both.

In India, the material points to a different set of drivers, including policy changes such as the GST exemption and margin effects tied to tax credits. It also noted stock performance diverging from the broader market, with SBI Life up about 44% year-to-date and HDFC Life up around 25%, compared with the Nifty’s 15% rise. Even without a direct link to U.S. private credit, the shared investor question is similar: how insurers manage long-duration liabilities, investment returns, and disclosure in a shifting rate and regulatory backdrop.

Conclusion

Short selling against U.S. life insurers has risen to around $1.3 billion as investors focus on private credit exposure and the transparency of captive structures. With sector performance lagging and earnings estimates under pressure, the next leg of sentiment is likely to depend on how insurers address disclosure concerns and how private credit valuations hold up under market volatility.