A billion‑euro blow‑up at a German pension fund is sharpening questions about how insurers and retirement plans are using private credit ratings – and should be on the radar of Canadian risk managers.
Berlin‑based VZB, which manages pensions for more than 10,000 dentists, has disclosed losses of about €1.1 billion after an aggressive push into private markets went sour, wiping out roughly half its assets under management. At the end of last year, the fund held around €2.2 billion and some €739 million in loans, “almost all” of which carried a BBB‑ rating – the lowest investment‑grade notch.
New chief executive Thomas Schieritz, who took over earlier this year, has publicly questioned those ratings, calling the concentration of so many loans in a single category “statistically completely improbable.” The fund is now the focus of a Berlin prosecutors’ probe into potential corruption‑related offences.
VZB’s private‑market bets spanned debt and equity in hotels, vacation resorts and startups, including digital carrier Element Insurance AG, which itself filed for insolvency earlier this year. The fund had hired mid‑sized lender ApoBank to analyse risks and compile detailed documentation, but the bank now “expressly rejects” any responsibility for the losses.
European supervisors are also mapping the scale of illiquid exposures. EIOPA recently estimated that occupational pension funds held about €128.4 billion of private credit at the end of 2024, while German insurers are the most exposed in Europe to illiquid corporate bonds and have already suffered losses on souring real estate debt.
For Canadian insurers, pension sponsors and intermediaries, VZB’s experience is a warning shot rather than a distant scandal. Years of low rates pushed institutions globally into private credit, real estate debt and other opaque assets in search of yield. Now, with higher policy rates and pressure on commercial property valuations, the questions are shifting from return to valuation:
