Summary

Situation Overview: Private assets and artificial intelligence (AI) are playing an increasingly prominent role across the financial system, including in capital markets and insurance. These developments are unfolding against a backdrop in which federal policy is encouraging access and growth, while financial stability and state authorities are focused on ensuring that regulatory frameworks remain effective as private assets and AI evolve.

What: U.S. policy direction on private assets and AI appears at times to conflict both among the federal regulatory authorities (private assets) and between federal and state authorities (AI). At the federal level, policymakers plan to broaden access to private market strategies for retail investors and within retirement plans, including through forthcoming Securities and Exchange Commission (SEC) and Department of Labor (DOL) rulemakings. At the same time, financial stability authorities at the Financial Stability Oversight Council (FSOC) and Federal Reserve Board continue to monitor private credit due to its growth in recent years. Likewise, adoption of AI has been the subject of expansive policy at the federal level. At the state level on both fronts, insurance regulators, through the National Association of Insurance Commissioners (NAIC), are exploring initiatives to improve visibility into insurers’ exposure to private assets and to oversee the governance frameworks supporting insurers’ use of AI.

Who: Life insurers; affiliated and third-party asset managers; retirement plan sponsors; private lenders and credit platforms.

In Depth

Recent federal policy initiatives emphasize expanding access to private markets and supporting the use of AI across the U.S. economy. However, these initiatives face some friction from certain financial stability and state authorities and create uncertainty for financial companies, including life insurers and asset managers.

Private Assets

Through Executive Order 14330 (Democratizing Access to Alternative Assets for 401(k) Investors), the Administration has set forth a policy in which private assets, including private credit and private equity, are tools to improve long-term retirement outcomes.

The DOL is expected to issue proposed and final rules to implement the Order later this year.  Such rules would expand access to private credit and other alternative assets within 401(k) and other retirement investment plans. Individual investors will have the ability to participate in markets long reserved for institutional investors.  Likewise, Executive Order 14330 directs the SEC to “consider[] revisions to existing SEC regulations and guidance relating to accredited investor and qualified purchaser status” to implement the “policy objectives of the order.” Financial stability authorities, however, have been focused on the financial system-level implications of the growth of private credit and have adopted a more measured posture. The FSOC’s 2025 Financial Stability Report stated that continued monitoring, particularly in light of private credit’s relative opacity and its increasing interconnections with other parts of the financial system, is warranted.[1] In November 2025, the Federal Reserve Board released its Semiannual Financial Stability Report; as part of the report, survey respondents cited “[private] credit markets …as a concern more frequently than in the previous [report’s] survey.” Notably, both the FSOC and the Federal Reserve Board have emphasized the need for improved understanding of how private assets behave under stress.

In parallel with federal efforts to expand access to private assets in retirement accounts, state insurance regulators, through the NAIC, have focused on strengthening the supervisory framework for how insurers appropriately capitalize for private assets. This comes as U.S. life insurers’ exposure to private credit has increased materially over the past several decades.[2]

In December, the NAIC adopted guiding principles for future revisions to the Risk-Based Capital framework. Central among these is the principle of “equal capital for equal risk,” which emphasizes that capital requirements should be driven by demonstrated economic risk characteristics rather than by asset labels alone.

These developments present a parallel policy and supervisory approach: federal policy is both expansive toward accessing private markets and cautious toward the potential financial stability implications. State insurance supervisors are focused on ensuring that insurers’ increasing investments in private credit are appropriately assessed within existing capital frameworks.

Artificial intelligence

AI policy has encountered its share of policy cross-currents. Within financial services and insurance in particular, AI is increasingly becoming an important part of front- and back-office business operations. As these systems become increasingly relevant to, for example, insurance underwriting, pricing, and risk assessment processes, the use of AI has become a matter of heightened supervisory interest.

Through Executive Order 14365 (Establishing Federal Review of State Artificial Intelligence Laws), the Administration has emphasized a cohesive federal approach to AI adoption while seeking to limit regulatory fragmentation arising from divergent state-level requirements. EO 14365 directs the development of a “minimally burdensome national standard” for AI and the establishment of mechanisms to review state regulations deemed inconsistent with federal priorities. The goal of the Order is to ensure that companies in the United States are “free to innovate without cumbersome regulation.”

The 2025 FSOC Financial Stability Report is generally sanguine about AI, stating that it “has the potential to support economic growth by generating new insights, boosting operational efficiency, and improving risk management” and may “lower barriers to entry for entrepreneurs.” As it relates to insurance companies, the report explains that AI is being used “to model catastrophes, improve pricing of policies to better reflect risks, and automate claims processing.” Financial stability and economic security risk are, according to the report, worth monitoring, but are “well understood by member agencies and appropriately managed by financial institutions.”  However, the report recommends that financial institutions should “monitor and appropriately manage their exposures to AI-related companies due to valuations that reflect strong future earnings projections.” A February 2026  article by economists at the Federal Reserve Bank of Chicago seemingly corroborates this view, outlining a tail risk scenario for “large banks with high concentrations of lower-rated software industry borrowers is [as] capital injections in AI software companies decrease and interest rates remain at current levels” that could result in “increased strain on the borrower to meet debt payments.” Respondents to the survey in the Federal Reserve Board’s November 2025 Financial Stability Report stated that “a turn in the prevailing sentiment toward AI . . . could lead to large losses in private and public markets.”  In parallel with the federal policy direction, the NAIC has been actively advancing its state-level supervisory posture on AI. Several states, including Florida, Connecticut, Pennsylvania, and Iowa, are preparing to pilot the NAIC AI Systems Evaluation Tool in 2026 exams, with the stated objective of standardizing supervisory review of how insurers use AI-enabled tools. This work reflects a broader shift toward demonstrating accountability, model documentation, ongoing monitoring, and appropriate vendor oversight. The NAIC has opposed recent efforts to preempt state authority over the regulation of artificial intelligence, including congressional proposals that would impose a moratorium on state AI regulations and the December 2025 AI Executive Order promoting a more uniform federal framework. This opposition signals that the federal-state relationship may remain unsettled, particularly as insurance regulators seek to preserve supervisory authority. The federal framework for AI policy is likely to remain a focus for the insurance sector.

Looking Forward

For insurers, asset managers, and other market participants, the dynamics among federal authorities and between federal and state authorities have increasing implications for balance sheets, investment activities, and core operational and risk management processes.

It will be important to closely monitor forthcoming regulations to broaden access to private assets, as well as how financial authorities’ supervisory focus on AI and private assets continues to evolve. As these trends mature, regulatory attention is likely to remain centered on visibility and resilience under stress, all within a state–federal framework that continues to balance innovation with prudential oversight.

Put Patomak’s Expertise to Work

Patomak advises banks, insurers, asset managers, and financial technology firms on prudential, market-conduct, and governance issues related to private assets, supervisory priorities, and the use of technology within regulated financial activities. Our team brings together former senior federal regulators across the banking, capital markets, and financial stability authorities, and industry practitioners with deep experience in risk management and compliance.

To learn how Patomak can help your organization assess the impact of developments discussed above, please contact Mona Elliot at melliot@patomak.com or Andrew Grub at agrub@patomak.com.

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[1] This is, however, a more measured tone than in the 2024 FSOC report, which was released in the final days of the Biden Administration.

[2] According to a 2025 Federal Reserve Bank of Chicago study, private credit represents approximately 14% of U.S. life insurers’ balance sheet assets, or about $849 billion.