US insurance regulators scrutinise KKR and Apollo-backed structured investment vehicles
US insurance regulators are increasing their scrutiny of complex structured investment products developed by private capital firms, warning that their growing use on insurers’ balance sheets could introduce hidden risks, according to a report by the Financial Times.
The concerns, which are linked to transparency, interconnected ownership and long-term performance, were outlined in documents prepared for upcoming meetings of the National Association of Insurance Commissioners (NAIC), the body responsible for developing insurance regulatory standards across US states. While the NAIC does not directly regulate insurers, its recommendations often shape capital and disclosure requirements adopted by state regulators.
The review centres on multi-asset securitisation structures, an expanding segment of the private markets that packages interests in multiple investment funds into rated securities. These vehicles can hold a broad range of underlying assets, including direct lending portfolios, mortgages, consumer credit, and private equity fund interests.
Private capital firms have promoted the structures as offering higher returns than traditional securitised products while retaining strong investment-grade credit ratings, making them attractive to life insurers seeking long-duration assets to back annuity liabilities.
However, regulators have warned that the complexity of the vehicles could mask concentrations of risk and create stronger links between insurers’ investment portfolios than may be immediately apparent.
According to the NAIC documents, the products have the potential to increase interconnectedness across insurers’ balance sheets, even where the underlying collateral is considered to be of relatively high quality.
The report cites unnamed people familiar with the regulatory review as saying that the working group is examining structures including Apollo’s Multi-Asset Prime Securities (AMAPS), which has been used by insurer Athene, as well as KKR-sponsored securitisation vehicles and private equity-related funds, including Thunderbird and Lightning, which have received investments from Global Atlantic.
Apollo defended its programme, stating that its multi-asset securities contain diversified holdings, utilise highly rated collateral with comparatively low leverage and have already undergone regulatory review. The firm said market participants familiar with the structures recognise both their transparency and benefits.
The NAIC working group is also considering whether additional disclosure requirements should be introduced for the underlying assets held within these vehicles.
A particular focus is the possibility of “circular ownership”, where investment structures could indirectly own interests in themselves or repeatedly invest in overlapping assets, creating greater concentrations of exposure than insurers realise.
Regulators warned that, as the market expands, separate investment vehicles could increasingly invest in one another or hold many of the same underlying assets, potentially amplifying systemic risks during periods of market stress.
Beyond ownership concerns, the review is also examining whether some multi-asset investment vehicles can consistently generate the long-term returns required to meet insurers’ obligations to policyholders.
Any move towards tougher disclosure standards or higher capital requirements could affect demand for these structured products, an area that has become an increasingly important distribution channel for private equity and private credit managers seeking insurance capital.
