As EP companies are expanding their presence in the insurance sector and insurers hold more EP assets, risk problems are increasing and regulators take note.
Traditionally, the life insurance and rent was renowned to be rather boring and make thin benefits. But after the financial crisis of 2008-2009, when the federal reserve launched an almost zero interest rate policy, many insurers found that their rent payments add up more than they won on their superior fixed income portfolios.
Private Equity has identified an opportunity in the inadequacy of interest rates. Although EP companies require capital to remain invested in a very long horizon, they often surpass traditional low -risk fixed income portfolios. As many insurers were underwater on their annuity and life insurance companies, they were eager to remove these assets from their books.
At first, they simply teamed up with PE companies to invest their assets. But large companies have realized that they could do better by competing themselves on the insurance and annuity market and have started to buy or create their own insurance companies.
Key development occurred when, in 2009, Apollo Global Management founded its own insurance company, Athene, which ultimately became the third annuity issuer in the United States. In 2021, Apollo bought the Athene part which he did not control. Some $ 75 billion in M&A insurance have followed; Allstate sold its life insurance activity to blackstone controlled entities for $ 2.8 billion in 2021 and Brookfield Reassurance bought American National a year later for $ 5.1 billion.
Today, investment capital is a force majeure in the world insurance industry, with different levels of activity through Europe, Asia and South America in addition to its breakthroughs on the North American market. Europe represents the most active region, with 437 transactions supported by PE last year. Asia, with Japan as a centerpiece, also notes an increase in the activity of PE, the values of the agreement up 11% in 2024. Insurance penetration in South America remains low, PE companies starting to notice, according to the World Insurance Report of McKinsey 2025.
“We have seen a seismic change in the way companies get a lever effect,” explains Mark Friedman, leader of American insurance agreements at Consultants PWC, who works with the investment capital sector. “We now see a big change towards private credit, and I think there is a lot of progress to make.”
Presence of the Private Equity portfolio
The change in investment strategies for insurance companies has also been dramatic.
Almost three -quarters of insurers recently interviewed by Mercer and Oliver Wyman now have private assets. And a survey of 410 insurance companies last October by Blackrock revealed that 91% planned to increase their benefits in private markets over the next two years.
“It will be interesting to see how distribution partnerships between private capital companies and insurers take place,” explains Danill Shapiro, director of product development practice at Cerulli Associates. “On the one hand, insurers can offer distribution capacities to companies which, otherwise, have them. But on the other hand, there can sometimes be a bad alignment between the insurer’s customers and the high -end product of private capital companies offered. ”
Competitive pressure has forced insurance companies to request higher yields or risk losing business to competitors who offer better rent payments, “said Friedman:” They had three options: they could offer a [annuity] The higher credit rate than they earn, they could stop selling the product, or could diversify and access higher return assets. »»
Investment capital funds often invest capital for long-term investors such as university allocations, sovereign wealth funds and state pension plans. But in recent months, when the University of Yale and other PE investors have announced its intention to sell some of their assets on the secondary market to collect funds, insurance companies as new sources of capital have been particularly welcome.
“What happened on the market prompted EP sponsors to consider insurance capital as a potential source,” explains Alex Argyris, partner of the Cleary Gotlieb law firm, who advises customers on investment capital. “Consequently, I do not yet think that we are at a saturation point.”
While most private activity-active investors are limited partners, expecting payment in a few years, insurance responsibilities represent a source of “capital forever” because bonuses for products such as annuities still reconstitute the amounts paid.
Another argument for the sale of investment capital is that companies have developed a pool of highly qualified and very paid experts in alternative assets, an expertise that lacks many insurance companies because of their focus investments.
A side effect of the MELD between insurance and investment capital is that insurers and PE companies move an increasing quantity of their life insurance and their offshore annuity assets, in particular for Bermuda and the Cayman Islands. The regulators of these places use traditional accounting practices of PCGRs rather than the stricter American standard, the reduction of capital insurers must hold in reserve. In addition, these jurisdictions offer a lower tax rate and impose less strict rules to invest in private assets than American regulators.
The attraction of offshore sites clearly increases. S&P Global Intelligence reported in May that insurance companies and investment capital sponsors had moved $ 130 billion in life insurance and rent assets to offshore entities in 2024, which brings the total to 1.1 billion of dollars.
Investment controversies
In addition to the advantages of private assets, however, risks are associated with the lack of transparency in many of these investments. The risks were highlighted when the insurance regulators of UTAH and South Carolina asked in 2024 that five insurance companies reduce their exposure to investments to a PE company based in Miami, 777 partners, which had exceeded the maximum regulatory for a single entity. The Bermuda Monetary Authority then canceled the company’s reassures’ insurance license.
A study of the International Monetary Fund published in December 2023 underlined the concerns that life insurers influenced by the PE have fewer liquid assets than all of all insurers. These companies “are more vulnerable to an unfavorable scenario potential for increasing business failures and credit demodations if the economy slows down due to higher interest rate,” the study revealed. “Such a scenario could force insurers to liquidate investments in the face of the increase in regulatory capital fees.”
Noting that there has never been a loss in a PE, Friedman PwC’s back insurance portfolio argues that PE companies are able to make more granular assessments of the risks of underlying assets that this is common in conventional fixed income portfolios.
Another controversy surrounds how assets are assessed by rating agencies.
During the 2008-2009 financial crisis, it appeared that the rating agencies had given triple-a notations to mortgage loans which were titled in bonds when the underlying mortgages were evaluated much lower. Similarly, the ratings of private credit and capital insurance portfolios are based on those of the fund supplier rather than on underlying individual assets, which could include more risky assets.
A study by the National Association of Insurance Commissioners (NAIC), in June 2024, found evidence of the inflation of assessments’ insurance assets by smaller rating agencies. Naic responded by creating a working group to consider the means to assess the capital requirements for so -called risks.
The group “will be responsible for developing guiding principles to update RBC formulas”, announced a NAIC declaration, “to respond to current investment trends by emphasizing greater RBC precision in the field of asset risk and to guarantee that the requirements in insurance capital maintain their current force and continue to properly balance solvency consumption.”
Some members of the Congress also expressed an increase in private assets held by insurance companies.
“Investments in investment in the investment capital have been nicknamed a Wall Street temporal bomb, ‘Senator Elizabeth Warren, Massachusetts Democrat, said in a letter of June 25, 2025 to Edmund F. Murphy III, CEO of the retirement of Empower, which, she said, had urged the Investment in priority and private credit. “Even institutional investors admit their uncertainty as to whether the very thin outcry is worth the risk of opaque and illiquid investments whose real value is often impossible to determine – investments that could crash when money is most necessary.”