Illiquid Insights
The market is on edge about a new potential risk to the financial system. It’s not a hedge fund or a bank.
It's a boring, centuries-old business.
Private equity has reshaped the life insurance industry, increasing risk-taking to enhance profitability. Now, the sector is under scrutiny.
Three reasons insurers are drawing attention:
PE ownership has surged
Illiquid investments are rising
Leverage is hidden through reinsurance
Read the full breakdown below.
On the Radar
Other reads worth your time this week.
What’s Going on in Private Credit? (Howard Marks)
Private Equity's Annuity Playbook
The life insurance business has transformed over the last two decades.
Following the global financial crisis, private equity began acquiring life insurers.
Today, these PE-backed platforms hold $1.4T in assets, growing at ~20% CAGR since 2014.
The foundation of this strategy is the fixed annuity business.
Why? Permanent capital.
Annuities collect capital upfront, which must be invested to fund future payments.
For private asset managers, this type of capital is the holy grail:
Perpetual - don’t need to fundraise every 5-7 years
Sticky fee income - long-term, predictable revenue
Flexible deployment - can invest in longer-duration assets like project finance
As a result, PE-backed platforms now account for roughly 35% of new U.S. fixed and fixed-indexed annuity sales.
More Illiquid Investments
The draw of annuities is simple: the spread.
Insurers earn the difference between what they make on investments and what they pay out to customers.