Five thoughts on life insurance liabilities being taken private

The migration of long-duration life insurance liabilities from listed insurers into private capital structures is one of the largest reallocations of financial capital underway in the developed world. Most of the basic shape is well-covered: Apollo, KKR, Brookfield and the others have built insurance balance sheets approaching a trillion dollars, the listed sector has shrunk, the regulators have started to push back. I do not need to recap that.

What got me thinking again about the sector was the Standard Life deal, and Gordon Aitken’s excellent piece on it. The structure is more interesting than it first looked to me, and I will write a separate note on it next week. But thinking about Standard Life pulled me back to the broader picture, and to five specific things about how the migration is actually working that deserve more weight than they are getting in the listed-to-private debate. Each of them changes how I would think about the next phase of the trade.

1. The Viridium consortium deal sets a bigger precedent than the coverage suggested

In January 2024, BaFin signalled it would block Viridium’s acquisition of a $20bn Zurich German life book on the grounds that Cinven’s private equity ownership did not provide sufficient assurance the business would be supported in stress. Cinven subsequently exited Viridium altogether, selling to a consortium of regulated insurers and asset managers (Allianz, BlackRock, T&D Holdings, Generali and Hannover Re). The trade press correctly linked the consortium sale to the regulatory pressure: this was widely understood at the time as Cinven taking the off-ramp BaFin had effectively forced. What I think was less clear in the coverage was the size of the precedent. A G7 regulator, in a major Western economy, just told private equity it could not own a systemically important life consolidator, and the consequence was a forced sale to a consortium of regulated insurers. That is the most concrete signal yet about the structure of life insurance ownership European regulators will tolerate going forward, and I think the implications for the next phase of the migration are bigger than the deal itself.

2. The Apollo / Athene advantage is fee capture, related-party pricing, and leverage, not better credit underwriting

The standard story about why private capital wins these deals is that firms like Apollo originate better private credit than listed insurers can. I do not think that is a convincing explanation. Listed insurers are also large private credit investors. MetLife, L&G, Phoenix, Aviva all have substantial allocations to private placements, CLOs, infrastructure debt, real estate debt and equity-release mortgages. A more convincing explanation is more specific and more constrained. Apollo captures the origination fee on the asset side as well as the spread, because it owns or controls the credit origination platforms it sources from. It uses related-party transfer pricing in ways a listed insurer’s governance regime would probably not permit at scale. And it uses leverage in offshore funded-re structures that is not available onshore. None of those advantages is about insurance underwriting. All three are about structure. That matters, because structural advantages are what regulators close, and underwriting advantages are not.

3. The model has only been tested in benign credit conditions

Athene was founded in 2009 and has compounded through one of the longest credit-benign periods in modern history. The “private capital is just better at this” claim is in fact a “private capital is better conditional on the last fifteen years of credit conditions repeating” claim. In a sustained credit downturn, defaults rise materially in middle-market private credit, and the related-party origination relationship creates an incentive for the credit platform to route weaker assets onto the insurer balance sheet rather than leaving them on a more exposed warehouse line. The duration mismatch on funded-re structures, manageable as a capital question in benign conditions, becomes a liquidity question in stress, particularly if the cedent has to recapture exposure. Eurovita is the only data point we have on what happens when stress meets a pure-PE life platform with an owner unwilling to recapitalise. The mechanism there was straightforward: Italian rates rose sharply in 2022, the asset side of the matched book underperformed, IVASS required additional capital, Cinven declined to provide it, and the regulator placed the company into special administration. That is a small version of a pattern I would expect to repeat in larger structures, in more systemically important jurisdictions, in the next real cycle. Anyone underwriting the next decade of private insurance economics on the assumption that the credit regime of the last fifteen years generalises is making a bet I would not take.

4. The listed sector is not retreating uniformly. It is splitting in two.

Most coverage talks about “the listed insurance sector” retreating from long-duration as a single phenomenon. That is wrong. Some listed insurers are exiting these books and trading toward asset-manager multiples. Others are deliberately scaling long-duration as their strategic core, and some of those are using the same offshore funded-re machinery as the private platforms while remaining listed. The interesting question is not “why are listed insurers losing this business,” but “why do some listed insurers appear genuinely able to value long-duration spread economics inside their portfolios while others do not, and what does the first group look like in 2030 when the second group has finished depleting?” I think the answer to the first question is mostly about strategic identity, capital allocation discipline, and the willingness of the management team to hold a complex business that takes effort to explain to generalist analysts. Why some firms have that and others do not deserves its own piece, and I will write it.

5. Trustees are the underweighted third actor

The migration debate has focused on two actors: the listed insurers selling, and the private capital firms buying. There is a third actor whose role in shaping the next phase of the migration is, I think, underweighted in most discussion of the trade. UK pension trustees, advised by LCP, Aon, WTW and others, have been actively scrutinising the funded-re usage and ownership structure of BPA writers for some time, and that scrutiny is well-covered in the pensions trade press. What is less commented on is how this is now feeding into deal terms. I understand from people closer to recent deals than I am that some major BPA transactions have included contractual restrictions on funded-re, on ownership change, or on asset-side concentration. If that pattern is generalising, the buy-side of the migration is constraining buyer behaviour at the deal level, not just at the regulatory level. That makes trustees the actor most directly shaping which buyers can compete for which books, on which terms, over the next five years. It deserves more attention in the listed-to-private debate, not just in the pensions trade press.

What these five things imply, taken together

The migration continues, but the form is going to change in ways that the simpler “private capital is taking over life insurance” framing misses. The regulators are visibly less tolerant of pure-PE structures than the consensus assumed. The economic advantages are more structural and more closable than the standard story suggests. The model has not been tested in real credit stress, and a full cycle is overdue. The listed sector is splitting into two distinct groups, and conflating them produces bad analysis. The trustees are quietly setting boundaries the buyers will increasingly have to operate within.

I think the next decade of this trade is going to belong to operators who recognise these five things early, and to be much harder for those who do not. I could be wrong about any specific element. I do not think I am wrong that the interesting questions are now in the structural details rather than in the headline numbers.