Nobody agrees what the private credit default rate is

Bloomberg put the problem plainly: private credit defaults are 1%, 6% or 19%, depending who you ask². Either the asset class has a serious default problem or barely one at all, and it all depends on who is counting². Fitch Ratings sits inside that range, and separately has the US private credit default rate hitting a record of 6.3%¹.

The disagreement is not academic. Private debt has gone from niche to a $2 trillion industry⁵, and the Federal Reserve has cited increased pressure on the private credit segment as a risk⁵. The Wall Street Journal’s framing is that opaque private-credit leverage raises risks for investors³, and CreditSights is publishing on what operational and financial pressures are driving elevated default risk⁹.

Why it matters to investors

Retail and retirement money is being routed into the asset class while the measurement question is open. Private market allocations in UK defined contribution default funds could rise to as much as 30 per cent by 2035, with private credit set to take a share of that⁷. A default fund is where savers end up when they make no choice at all, which makes the reliability of the default rate a consumer-protection question as well as a credit one.

Regulators are circling from several directions. ESMA has flagged US private credit risks for European investors⁶, AM Best is presenting on private credit risks at an insurance summit in 2026⁸, and American Banker has warned that banks financing the AI build-out are lending with less visibility into credit risk than they would otherwise have¹⁰. That last point matters because private credit lending to AI is one of the fastest-growing exposures in the book¹⁰.

What to watch

The insurance channel is where the stress is already visible. A-Cap insurers face a new takeover push in South Carolina over exposure to high-risk private credit, after the department issued a cease-and-desist order on Dec. 11, 2024 as financial concerns escalated⁴. The same case is being tracked as a bankruptcy story³.

Watch, too, for borrowers refinancing out. Wealth manager Mercer is taking out private credit loans with a new loan, swapping into cheaper capital in the bank loan market¹. When the best credits leave for bank financing, the remaining pool gets worse, and the definition question becomes the only thing standing between an investor and knowing what they own^2,5.