Private Equity Ownership of Life & Annuity Carriers: The Case for Net Concern

Part 1 of a Two-Part Series

Private equity ownership of life and annuity (L&A) insurers has gone from a fringe experiment to a core structural force in the retirement ecosystem. A relatively small number of alternative asset managers now control hundreds of billions of dollars of long-dated insurance liabilities—and the investment portfolios that support them.

That shift has sparked intense debate.

Some argue PE ownership has rescued stagnant insurers, improved yields, modernized investment management, and brought scale and sophistication the industry desperately needed. Others worry about leverage, opacity, liquidity risk, and conflicts of interest embedded in increasingly complex ownership structures.

Both sides are partially right.

But the discussion is often shallow, emotional, or disconnected from how these structures actually work.

This article focuses on the argument for net concern—not as an indictment, but as a clear-eyed examination of the structural risks that deserve serious attention.  Part 2 will present the argument for optimism and explain why many insurers actively choose PE ownership.

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Why This Debate Matters Right Now

The convergence of private markets and insurance did not happen by accident. It was driven by three powerful forces:

1. Insurers needed yield after more than a decade of low interest rates.

2. Private equity firms needed long-duration, stable capital to scale private credit and alternative investment platforms.

3. Regulatory frameworks evolved more slowly than financial innovation.

The result is a fundamentally different insurance ownership model—one that behaves differently in good times and, potentially, very differently under stress.

This isn’t about predicting failure.

It’s about understanding how the system now works.

The Leverage Question — “The Core Book Multiplier”

Private Equity Ownership of Life & Annuity Assets Has Exploded

Over the last 15 years, private equity firms have gone from marginal participants in life and annuity insurance to dominant owners of long-duration liabilities.

While estimates vary by methodology, most industry sources converge on the same conclusion:

PE-controlled life & annuity assets have grown more than 10x since the Global Financial Crisis.

Estimated Growth of PE-Owned L&A Assets (2009–2024)

Year	Estimated PE-Owned L&A Assets
2009	~$150–200 billion
2013	~$300–400 billion
2017	~$600–700 billion
2020	~$900 billion
2024	~$1.3–1.6 trillion

Sources: NAIC disclosures, rating agency estimates (Moody’s, Fitch, S&P), public transaction data, insurer statutory filings.

Why this matters: Scale changes everything — liquidity needs, market impact, regulatory sensitivity, and systemic relevance. What once could be dismissed as “niche” ownership is now embedded in the core of the retirement system.

The industry is no longer asking whether PE-owned insurers matter — but how they behave under stress.

Let’s be direct: we still do not have a clean, transparent picture of true economic leverage inside many PE-owned insurance structures.

Why?

Because leverage today is often embedded through:

• Offshore captives and affiliated reinsurers

• Funded and structured reinsurance

• Sidecars and co-investment vehicles

• Surplus notes and internal financing

• Collateralized note and funding structures

Each element may be defensible in isolation. Together, they create layers of leverage that are difficult to observe, model, or unwind.

Credible estimates frequently place economic leverage well north of 12x, depending on how one treats affiliated structures. More importantly, these structures are far easier to build than dismantle, particularly during periods of market stress.

Leverage itself isn’t the problem. Opacity is.

And leverage magnifies every other risk discussed below.

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Stress Point #1 — Small Shifts in Policyholder Behavior Can Break the Machine

Insurance models rely on predictability: premiums in, benefits out, lapses and surrenders within expected ranges. But policyholder behavior is never static, especially during periods of economic uncertainty.

Even modest deviations in:

• Surrender rates

• Partial Withdrawals

• Policy loans

• Annuitization behavior

…can force difficult liquidity decisions.

This risk is amplified when investment portfolios lean heavily toward:

• Private credit

• Structured credit

• Commercial real estate lending

• Long-duration, illiquid alternatives

The Portfolio Shift That Changes Liquidity Risk

• The concern around policyholder behavior is not theoretical — it is tightly linked to how assets are invested.

• Over the past decade, portfolio composition has diverged sharply between traditional insurers and PE-owned insurers.

Illustrative Portfolio Mix Comparison

Asset Type	Traditional L&A Insurer	PE-Owned L&A Insurer
Public Investment-Grade Fixed Income	65–75%	35–50%
Private Credit (Direct Lending, Structured Credit, ABS, CRE Debt)	5–10%	30–45%
Alternatives (Equity, Real Assets, Structured Equity)	5–10%	10–20%
Cash & Short-Term	3–6%	2–4%

·         Sources: NAIC Schedule D, insurer statutory filings, rating agency research, public investor disclosures.

Key takeaway: Private assets are not inherently risky — but they are less liquid, harder to price, and slower to exit during stress.

When policyholder behavior shifts at the same time liquidity tightens, portfolio composition becomes the difference between resilience and forced action.

Behavioral risk hasn’t changed. Liquidity risk has.

When liquidity evaporates at the same time behavior shifts, insurers may be forced to sell assets at precisely the wrong moment. That dynamic deserves careful stress testing—not optimistic assumptions.

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Stress Point #2 — Incentive Misalignment & Exit Optionality

Incentive Misalignment

Here is an uncomfortable but unavoidable truth: What benefits the parent PE sponsor does not always benefit policyholders. Not because of bad intentions—but because of incentives.

Private equity firms are designed to:

• grow assets under management

• generate origination throughput

• monetize assets efficiently

• deliver returns aligned with fund lifecycles

Insurance companies, by contrast, exist to honor promises that stretch decades into the future.

Those are fundamentally different objectives. Most of the time, they coexist peacefully. But under stress, incentive misalignment matters.

Exit Optionality

Every PE-owned insurer is built with exit pathways:

• block sales

• portfolio transfers

• reinsurance restructurings

• whole-company sales

This is rational and expected. But it introduces tension during market downturns.

During the early days of the Global Financial Crisis, the institutions that survived were not improvising. They were executing pre-planned exit and survival strategies.

PE-owned insurers will have similar playbooks. The key question is whether those strategies optimize outcomes for policyholders—or primarily for sponsors.

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Stress Point #3 — When the Issuer and the Buyer Live Under the Same Roof

This is the most sensitive issue—and arguably the most important.

Many PE platforms now control the full investment chain:

origination → structuring → pricing → distribution → balance-sheet ownership (via insurers).

That vertical integration is efficient. It is also fertile ground for conflicts of interest.

When an insurer is the largest, most reliable buyer of its parent’s deals, pressure does not need to be explicit. It can appear subtly:

• tighter spreads still deemed “acceptable”

• deals bought because inventory needs to move

• risk accepted because internal supply must clear

These pressures are cultural, not contractual. And they are extremely difficult for regulators to detect or quantify.

This is not an accusation. It is an acknowledgment of human behavior inside integrated financial organizations.

In an industry built on fiduciary duty, even the possibility of conflicted incentives deserves scrutiny.

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Why These Concerns Matter for Systemic Stability

Individually, none of these stress points are fatal.  Together, they create a new risk architecture for retirement and insurance markets:

• long-dated, confidence-sensitive liabilities

• opaque leverage

• concentrated private asset exposure

• liquidity mismatches

• 
  

  incentive-driven capital movement

• complex, interconnected ownership structures

Financial systems rarely break because of one flaw. They break when multiple small vulnerabilities align under stress.

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Conclusion — Transparency, Liquidity, and Reality-Based Stress Testing

This article is not an argument against private equity ownership of insurers. In fact, Part 2 will outline why PE ownership has delivered real benefits, including stronger investment capabilities and improved economics.

But confidence requires transparency.

And this matters even more because PE firms are expanding beyond insurance into other systemically important areas—including 401(k) platforms, retirement infrastructure, and wealth-management ecosystems.

With that expansion:

• demands for transparency will increase

• liquidity expectations will rise

• data quality will matter more than ever

PE firms know this. Many are already investing in:

• internal market-making capabilities

• secondary trading platforms for private credit

• improved valuation engines

• better asset-level data infrastructure

These efforts could materially improve liquidity and transparency across private markets.

But progress starts with honesty about risk.

That is the purpose of Part 1.

Subscribe for Part 2: “The Positive Case for PE-Owned Insurers.” I also invite dialogue from CIOs, CROs, actuaries, regulators, carriers, distributors and advisors who are navigating these structural shifts.

My goal is to remain a balanced voice examining how insurance, asset management, and private markets are evolving—and what that evolution means for long-term stability.