Private equity firms, including Apollo, Ares Management, Blackstone, Brookfield, and KKR, have profoundly reshaped the life insurance industry over the last decade. These firms have bought, built, or partnered with insurers, collectively commanding hundreds of billions of dollars in assets. This trend has seen private equity-owned insurers boost their holdings in alternative credit, with financial borrowers jumping from 2% to 8% of assets.
One significant example is Apollo's Athene, which has conducted at least 49 deals, converting nearly $53 billion of pensions into annuities for approximately 535,000 people. Many of these firms are also shifting liabilities to offshore affiliates, which are subject to less rigorous disclosure requirements than those in the US. This allows them to seek higher returns through more sophisticated and potentially less-liquid investments.
Concerns about these practices are growing among executives, government watchdogs, and economists. Federal regulators have been briefed on these rapid industry changes, and economists at the Bank for International Settlements estimate that North American life insurers, if publicly traded, could face a capital shortfall of about $150 billion in a severe economic downturn, more than triple the figure from two decades ago. Private equity now controls almost $700 billion of life insurance assets, dedicating more funds to private and structured credit and embracing complex offshore strategies to take on more risk. An AM Best study in 2021 found that Wall Street-owned insurers earned 0.62 percentage points more on their portfolios, suggesting an investment in riskier assets compared to traditional insurers.
