Credit risk insurers increased their protection of significant risk transfer tranches by 59% to €4.7bn in 2025, as banks made greater use of unfunded insurance to release regulatory capital and expand their capacity to lend.

The International Association of Credit Portfolio Managers said 14 global insurance and reinsurance groups provided 96 new unfunded protections during the year, up 23% from 78 in 2024. Those participations covered 69 bank-originated SRT transactions, compared with 53 a year earlier.

By the end of 2025, participating insurers had €10.9bn of outstanding protection across SRT tranches linked to approximately €366bn of underlying bank loans. Business finance remained the largest part of the market, with large corporate exposures representing 40% of newly protected portfolios and SME lending another 18%. Trade finance was among the other asset classes covered.

SRT allows a bank to retain loans on its balance sheet while transferring a defined layer of credit risk to outside protection providers. Where supervisors recognise that transfer for regulatory purposes, the resulting reduction in risk-weighted assets can release capital for new lending.

The insurance market is becoming more important alongside funded SRT investors. Average exposure retained by an individual participating insurer reached €50m in 2025, while median underwriting appetite was €85m. Surveyed capacity ranged from €20m to €300m per insurer participation.

Growth expectations remain unusually strong. Respondents expect the number of insurance-backed SRT protections to rise by about 50% during 2026, with growth of more than 50% anticipated for corporate, SME and asset-based finance portfolios. Residential mortgage protection is expected to grow by about 37%.

The constraint may increasingly come from regulation rather than available insurance capacity. IACPM said respondents see banks’ ability to achieve efficient capital relief from unfunded protection as more limiting than insurers’ willingness to take additional exposure.

That matters for working-capital lenders because capital released from corporate, SME, trade and asset-based portfolios can be recycled into new financing without requiring the originating bank to dispose of the underlying customer relationships.