By Heather Gillers
Insurance companies are increasingly investing policyholders' money in private credit sold by parent firms or affiliated parties, an approach critics say sets up potential conflicts of interest.
Wall Street's biggest private asset managers have flocked to life insurance over the past decade, viewing insurers' huge portfolios as a perfect match for their investment products. Now insurer portfolios are filling up with products created by related private-equity firms such as Apollo Asset Management and Brookfield Asset Management. So-called affiliated assets grew 22% to a combined $127 billion over the past year for six private-equity linked life insurers tracked by The Wall Street Journal.
American Equity Investment Life Insurance's affiliated asset portfolio grew to $6.5 billion last year from $450 million in 2023 after it was purchased by Brookfield Corporation's Brookfield Wealth Solutions arm. Athene, owned by Apollo Global Management, last year reported the most affiliated assets of any insurer at $52 billion -- $12 billion more than in 2024. More than a third of assets were deemed affiliated at Security Benefit Life, which is owned by billionaire sports investor Todd Boehly alongside private asset manager, Eldridge.
"Where we've seen most of the increase in affiliated investments in recent years is from insurers partnering with affiliated asset managers that have more direct credit origination capabilities," said Kevin Clark, chief accounting specialist at the Iowa Insurance Division.
There are risks to policyholders: Asset managers could impose excessive fees on affiliated insurers or stash underperforming, hard-to-sell assets on insurance company balance sheets.
Athene and other insurers with large affiliated asset portfolios say they maintain strict controls to ensure they purchase only investments aligned with policyholders' interests. Security Benefit said all transactions with affiliates are conducted on "arm's-length, market consistent terms."
Insurers report as "affiliated" debt or equity of an affiliate as well as investments sold by an affiliate but backed by a third party. In 2025, they reported $413 billion worth, according to insurance ratings firm AM Best, twice as much as in 2020. That is only 7% of life and annuity insurers' $6 trillion in investments. At the private-equity linked insurers the Journal tracked, though, the share was between 10% and 30%.
Affiliated assets account for much of the growth of complex private credit on insurer balance sheets. Their rapid run up has also at times forced state insurance commissioners to moonlight as forensic accountants, teasing out company relationships. And the trend has alarmed international regulators. Staff at the Bank for International Settlements warned in an October report that "PE-linked firms can face conflicts of interest" since they are motivated to put insurer money in the investments they originate.
Some insurers said they benefit from VIP access to choice investments sold by their private-equity siblings. In remarks at a conference this month, Apollo head of third-party insurance client management Michael Pagano pointed to Apollo's 2024 sale of $11 billion in debt backed by an Intel chip factory in Ireland and rated investment grade. Almost half went to Athene while the rest was split among dozens of outside insurers and other buyers, Athene has said.
Apollo can "hunt in a pack on a $12 billion transaction," Pagano said. "So we tell Intel, 'you're done.' We take ours and we bring our friends along."
It doesn't always go so smoothly. Minutes from a meeting last year of the National Association of Insurance Commissioners, a group of the top regulators in every state, recounted that a state commissioner who stepped in to examine a troubled insurer had found a "significant" amount of previously undisclosed affiliated investments and "identified significant concerns regarding the valuation of the securities."
The regulator group said in a statement that states check for proper disclosure of affiliated investments during company examinations, which are required every five years.
"Insurance regulators have long recognized that affiliated and related party investments can create complexity," the group said in a statement.
Affiliated holdings aren't new. Berkshire Hathaway's insurers hold the equity of many companies Berkshire owns or holds a large stake in, including Duracell, Occidental Petroleum and Sirius XM. Publicly traded insurers like Prudential also have asset management arms, and those businesses have long issued private loans to companies and placed them in insurance portfolios.
But private-equity linked insurers' affiliated investments are different. A December analysis by AM Best found that other types of insurers generally confine their affiliated holdings to their stock and alternative asset portfolios -- relatively small side holdings for which they are typically required to hold a bigger financial cushion.
At private-equity linked insurers, on the other hand, 56% of affiliated assets are classified as bonds, the core investments that insurers rely on to pay out claims. And most of those bonds are asset-backed securities -- structured loans repaid through cash flows such as credit-card or car payments, the ratings firm found. Other insurers generally stick to loans or obligations backed by one company or bank.
Josh Esterov, head of U.S. insurance research at CreditSights, said that while affiliated deals often benefit both parties, the insurer has to have robust risk management and "some amount of ability to say 'No, we don't need that.' Otherwise the private-equity sponsor is motivated to endlessly pump out investments to farm out to the insurance industry."
Write to Heather Gillers at heather.gillers@wsj.com
(END) Dow Jones Newswires
May 26, 2026 05:30 ET (09:30 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
Comments