You Bet Your Life (Insurance): U.S. Private Equity Comes For Your Annuity – Analysis

March 4, 2026 
By Eileen Appelbaum


There are signs that private equity’s destabilizing role in the insurance industry is growing.


In 2020 and 2021 (as we wrote at the time), large private equity (PE) firms were buying up life insurance companies to gain control of their huge annuity assets. Insurance companies had invested the premium payments for clients’ retirement savings in safe, publicly traded and highly liquid stocks and bonds. But years of low interest rates crippled this asset business, and the returns on these investments were no longer adequate to fund the required annuity payments.

As a result, insurance companies were anxious to unload their annuity portfolios. Large PE firms saw an opportunity to quickly increase their assets under management by acquiring or taking control of managing these annuity assets.

An annuity is a long-term contract with an insurance company that provides retirement income to individuals, who pay a premium that is invested by the insurance company and grows tax-deferred. When the individual grows old, they receive regular payments that fund their retirement. Annuities are attractive to private equity firms because they are a source of ‘permanent capital’ that replenishes as premium payments flow in and offset outflows to recipients of annuity payments. PE firms were confident they could increase returns on these assets and make them profitable by investing some of these annuity assets in illiquid private market equity buyout and credit funds. Smaller PE firms also got involved by buying up smaller insurance companies.

At the end of 2020, PE firms controlled $471 billion (nearly 10 percent) of annuity assets and had acquired 50 of the 400 annuity companies in the US. Apollo, which had a majority stake in Athene, the life insurance company it had founded in 2009, acquired all of its annuity assets In 2021 — worth about $194 billion at the time. Apollo said that it planned to invest about 5 percent of Athene’s funds in riskier, fee-paying alternative assets, including its own PE and debt funds. In 2021, Blackstone paid $2.2 billion to American International Group (AIG) for a 9.9 percent stake in its life insurance and annuities unit and gained control of the investment decision of much of its portfolio of annuity assets. Blackstone also struck a deal in 2021 to buy a life insurance unit of Allstate Corporation. As a result of these transactions, Blackstone’s insurance assets under management reached $150 billion by the end of 2021. The insurance assets it controls accounted for a third of Blackstone’s overall assets under management that year. In July 2020, KKR announced it was buying the life insurance and retirement income company Global Atlantic Financial Group for $4.4 billion and taking over management of about $70 billion of Global Atlantic’s assets. The deal raised the assets KKR managed on behalf of insurance companies from about $26 billion to more than $96 billion, and increased KKR’s total assets under management by 30 percent.


Fast forward to the fall of 2025, and we see that this trend towards investing in private assets is intensifying. According to Mark Friedman of PwC, there has been a seismic shift; he reports that a recent survey found close to three-quarters of insurers now own private assets, and a second survey of 410 insurance companies found that 91 percent planned to increase their allocations to private markets over the next two years.

Indeed, Apollo, Blackstone, KKR and their rivals have loaded up their own annuity businesses with private credit investments. And clients holding annuity contracts have found themselves with increasingly risky assets. Back in 2020, risky private investments made up a small share of annuity asset investments. But this proved to be a successful strategy, boosting the returns of the life insurance companies owned by the large PE firms — enabling them to undercut rivals and increase market share. Other life insurance companies soon followed, including traditional companies like MassMutual that now hold a large number of private market illiquid bonds.
Murky Level 3 Assets Add More Risk

Fueling concerns about these investments is that they include so-called Level 3 assets. The lack of transparency in private equity and other private markets is well-known. But these illiquid assets are even more opaque; they lack reliable market pricing, and often have unreliable private ratings or no formal rating from a rating agency. There are no market mechanisms for determining the price of these assets or the amount of reserves insurance companies with these assets should hold.


PE firms express confidence in the ratings of these assets, but regulators and others question whether they are overvalued. In just a few years, investments in riskier assets that include Level 3 assets reached 18 percent of the insurance industry’s $3.8 trillion in fixed income holdings. Level 3 assets accounted for about a third of Athene’s and Global Atlantic’s total assets in the third quarter of 2025. The concerns that were raised a few years ago that annuity assets of PE-owned insurance companies would be used to bailout or boost the performance of affiliated private equity funds are no longer theoretical. The highly regarded AM Best insurance rating agency found that about a fifth of investments by Athene’s US Life Group and by KKR’s Global Atlantic now come from loans to affiliated funds. In particular, private equity-owned insurers are allocating a lot of their investments to affiliated credit funds.

PE-owned insurers are, as the Financial Times put it, the lifeblood of private credit. This self dealing is also a concern. Are PE firms using annuity assets of insurance companies they own to provide loans to their affiliated private equity and private credit funds to shore up struggling portfolio companies, or distressed loans made by their credit funds? The lack of transparency makes it impossible to quantify.
The Serious Risks Facing Annuity Policy Holders

Evaluating PE investments is challenging because little reliable public information exists about how these firms invest insurance assets, making it difficult to gauge the effect on returns to beneficiaries. Moving annuity investments into private credit funds with Level 3 assets increases the risk that some of these investments will fail, slashing the retirement income of beneficiaries. It also provides PE firms with opportunities to earn high fees for managing the assets. These fees also reduce returns to annuity holders and may wipe out the added return to compensate annuity holders for the higher risk these assets carry. Level 3 loans are especially illiquid, making them more difficult to trade than other private market investments. This makes them difficult to sell to meet annuity retirement obligations as well as redemptions by policy holders in the case of a personal emergency or an economic slowdown and cash crunch.


The surge in redemptions in the fourth quarter of 2025 compared with the third quarter raised questions about whether some insurers might fail and leave their annuity policyholders dependent on reduced payments from state guaranty funds for retirement income. The International Monetary Fund raised another issue; their 2023 study found that PE-backed insurers have fewer liquid assets than is the case for all insurers, making them more vulnerable to an increase in corporate defaults and credit downgrades caused by a slowing economy.

The situation is rife with conflicts of interest, most notably PE firms providing valuations for credit funds with Level 3 loans and asking annuity holders to trust them. But even rated bonds can be problematic. Rating firms have conflicts of interest since they are paid by the companies whose bonds they rate. The ratings potentially understate the riskiness of the bonds. Regulators and others concerned about the financial stability of insurance companies and their annuity asset investments question whether this debt is riskier than the ratings indicate, meaning that insurers could experience unexpected losses, making them unable to pay promised benefits to people counting on annuities to fund their retirements. Opportunities for corrupt self-dealing are widely available as PE firms can use the insurance assets to shore up the finances of failing or struggling funds they own.
Cracks Emerging in Private Credit Funds

Evidence of potential problems arising from investments in private credit funds by insurance companies, whether owned by PE or not, are beginning to emerge. Unrelated problems at two life/annuity insurance companies have heightened concerns about the financial stability of private equity-owned insurers.

In 2015, PE firm Golden Gate Capital established Nassau Financial as a life insurance platform. In 2016, Nassau Financial acquired troubled life and asset insurance company Phoenix, among other companies, and renamed it PHL Variable Insurance Company. To reduce its liabilities, PHL entered several reinsurance deals with Nassau-owned or affiliated reinsurance companies based in Bermuda in 2019. But these deals failed to put PHL on a sustainable course. On March 31, 2025, the Connecticut Insurance Department (CID) took PHL into “rehabilitation” to try to restore it to financial stability. CID found that PHL had negative $900 million in capital and surplus, its assets will be exhausted in 2030, and it will be unable to pay approximately $1.46 billion owed to policy holders at that point. PHL’s auditor said it doubted the company could move forward as a going concern.

By December, it had become clear that PHL could not be rehabilitated, and CID turned to liquidation as the better option. The regulator found that PHL lacked enough assets to make restructuring a viable option, and that liquidation would lead to larger payouts to policyholders. In the meantime, until a final order determines PHL’s fate, policy holders are caught in a Catch-22. While CID sought to rehabilitate PHL, it froze more than $500 million of policyholders’ retirement income, leaving many of them in the lurch. To add insult to injury, policyholders had to keep their policies active. This meant policyholders had to continue paying premiums without knowing if they would ever receive the payments they were counting on to fund their retirement. This led to a steady increase in lapsed policies. These policy holders will not receive any benefits from the premiums they had paid for years or even decades. While those with active policies have continued to receive retirement benefits, All benefits will cease 30 days after a liquidation notice is released. Active policy holders will be eligible for reduced benefits from the state’s insurance guaranty program.


The second example involves Atlantic Coast Life (ACL), Sentinel Security Life (SSL), and Haymarket insurance. ACL and SSL are units of PE firm Advantage Capital, known as A-CAP. The asset manager is PE firm 777 Partners and Bermuda-based reinsurer 777 Re, whose principals are Josh Wander and Steve Pasko. 777 Partners began leveraged buyouts of soccer teams in Britain, France, Australia, Germany, Spain, Italy and Belgium, and quickly met resistance from managers and fans. Wander and Pasko spent millions of dollars acquiring stakes in European clubs, and some of that money allegedly came from the two insurance/annuity companies owned by A-CAP. In 2023, the empire of European clubs collapsed. Lawsuits filed against 777 Partners and 777 Re are asking for tens of millions of dollars in repayment. Corruption is also alleged by a London PE firm with a fund that focuses on investments linked to life insurance companies. The PE firm is suing Wander, Pasko and the CEO of A-CAP because 777 Re used $350 million it had committed to another company as collateral for a loan from the London firm. The implications for the PE-owned life/annuity companies in the US are not yet known, but are likely to be negative.

PE firm 777 has been in other trouble with regulators. In 2024, insurance regulators in Utah and South Carolina told five insurance companies to reduce their investments in 777 Partners because they were overcommitted to the PE firm and exceeded the maximum investment allowed.

Large PE firms that own insurance/annuity companies are nervous that the many small PE firms emulating their money-making ways will bankrupt the insurance companies they own — which they fear may bring down the lucrative house of cards they have built in the last 4 or 5 years. They don’t want regulators to turn their focus to the dangers of this use of insurance company assets to fund private credit funds. The company giving them angina is Acquarian, a small private equity firm founded in 2017. Acquarian plans to acquire Brighthouse Financial, a problem-ridden life insurance company with more than $230 billion committed to life and annuity policy holders. The deal is not yet final. Apollo and Carlyle, major PE firms, had previously looked into acquiring Brighthouse and decided against it after evaluating the challenges and demands of the company.


In November 2025, Aquarian made an offer to acquire Brighthouse at the eyebrow-raising price of $4.1 billion, double the valuation that other PE firms came up with. The concern is that companies like Aquarian and Brighthouse are using annuity assets to make ever more risky investments in order to break into a crowded field and gain market share. And they are right to be concerned. Regulators are raising questions about the difficult-to-measure risks to the financial system from this money-making PE business model in the private credit market.

Investors have already begun voting with their feet, dumping shares in the fourth quarter of 2025 in PE firms including Ares, Blue Owl, KKR and Apollo. Concerns that annuity investments may be overvalued have bubbled up over the past year. The triggering event for the wave of redemptions at the end of 2025 was a fear that many software companies that have borrowed from PE-owned private credit funds are vulnerable to AI and may not be able to repay the loans they took out. The lack of transparency surrounding private credit funds makes it impossible to evaluate just how vulnerable they are. But some investors are not waiting to find out.

Eileen Appelbaum

Eileen Appelbaum is co-director of CEPR and fellow at Rutgers University Center for Women and Work. She has held visiting positions at the Wissenschaftszentrum (Berlin), University of Manchester and Leicester University (UK), University of South Australia, and University of Auckland (New Zealand). Prior to joining CEPR, she held positions as distinguished professor and director of the Center for Women and Work at Rutgers University and as professor of economics at Temple University. She holds a PhD in economics from the University of Pennsylvania.