On April 22, 2025, the Paul Milstein Center for Real Estate hosted an insightful panel moderated by center co-director Professor Stijn Van Nieuwerburgh, featuring industry leaders Nasir Alamgir (Barings), Richard Cantor (Moody’s Investor Services), and Catherine Chen (Apollo Global Management). Below we summarize key insights on the evolving relationship between insurance companies, private equity (PE) asset managers, and commercial real estate lending that emerged from the panel discussion.
Why Do Private Equity Firms Acquire Life Insurers?
“These purchases are strategic,” noted Dr. Cantor, Vice Chairman of Moody’s Investor Services, during a discussion on why PE firms are acquiring life insurers. Insurance companies manage large pools of capital, primarily derived from long-term liabilities (such as life insurance policies and fixed annuities), which provide stable and predictable funding. This capital is especially well-suited to investments in long-duration, fixed-income commercial real estate loans whose structure aligns with the maturity profile of insurers’ obligations. As Professor Van Nieuwerburgh noted, “insurance companies seem like a natural balance sheet to house some of that CRE debt.”
PE firms have leveraged these insurance acquisitions not merely for traditional investment, but increasingly to expand into structured securities markets, including CMBS, CRE CLOs, and private commercial real estate lending. PE firms tap into the stable balance sheets of affiliated insurers to originate loans, which are then structured and securitized in ways often tailored to those same insurers—who may purchase and hold a portion on their own balance sheets—creating a highly integrated financial ecosystem.
Regulartory Roots: The Post-GFC Shift
The Global Financial Crisis (GFC) reshaped financial markets significantly. In its aftermath, increased regulation constrained traditional banking institutions, pushing banks back toward conservative commercial banking and away from structured securities. Insurers stepped into this vacuum, facilitated further by regulatory changes by the National Association of Insurance Commissioners (NAIC).
Previously, capital requirements for insurers holding debt were strictly ratings-based. However, post-GFC, regulators introduced new rules that linked capital requirements primarily to the difference between the book and fair market values of debt holdings. Academic work by Kirti and Sarin (Review of Financial Studies, 2024) illustrate this change with the following example: a structured security with a $100 book value and a 5% default probability, held at a fair market value of $95, now faces the same capital requirements as a $95 corporate bond with zero default probability. This subtle regulatory shift significantly reduced capital constraints on riskier assets and increased insurers' exposure to structured securities.
PE Firms Exploit New Opportunities
Recognizing these new regulatory opportunities PE quickly entered the life insurance space, leveraging their expertise to pursue a range of arbitrage strategies —an approach explored in Kirti and Sarin (2024):
- Offshore Reinsurance Arbitrage: Insurers, guided by PE owners, increasingly moved to offshore reinsurers (often in Bermuda), minimizing both tax liabilities and capital requirements.
- Risk Arbitrage: Due to the regulatory change, PE-owned insurers now hold riskier structured debt assets without facing proportionate increases in required regulatory capital.
As a result, the PE presence in the life insurance industry ballooned from next to nothing before the GFC to over $600 billion in 2023, representing approximately 12% of the entire life insurance sector’s assets.
Strategic Shifts in Lending: Apollo Global and Athene
Catherine Chen, Managing Director in the Real Estate Credit group at Apollo Global Management, emphasized how these strategic insurance acquisitions have fundamentally reshaped the business model. In 2022, Apollo merged with Athene (insurance company). Today, Athene is fully integrated within Apollo and accounts for about 45% of Apollo’s $750 billion assets under management. Athene’s large insurance capital base provides Apollo with a recurring source of liabilities that it seeks to invest in higher yielding assets that it originates through its asset management business. This approach is highly synergistic and provides strong alignment, which Chen described as key to Apollo’s substantial growth in real estate credit and has allowed the real estate credit team to expand its origination scope and offerings to its clients and partners.
Insurance Companies Respond: The Barings-Mass Mutual Model
Perhaps in response to the PE-led evolution, some insurers have proactively developed their own asset management capabilities (Foley-Fisher et al., Working 2023). Richard Cantor pointed out, however, that the practice of insurers owning asset managers has a long-standing history. An early example is Barings, a global asset management firm and subsidiary of MassMutual. For more on Barings’ history, please see here. Barings manages assets for MassMutual as well as third-party institutional investors.
Growing Risks and Regulatory Concerns
The close alignment of insurers and asset managers has not escaped scrutiny. Policymakers, academics, and rating agencies have all expressed growing concern about the increased risk exposure and opaque fee structures that can emerge from such intertwined relationships.
Professor Van Nieuwerburgh asked Richard Cantor directly about these issues. Cantor highlighted several core concerns, including:
- Reduced transparency, especially related to offshore reinsurance.
- Potential self-dealing concerns in structured asset transactions.
- Regulatory arbitrage, which might conceal underlying risk from public view.
Cantor acknowledged that the implications aren't clear-cut: “It could be good for society; it could be bad. It’s a complicated question.”
Supporting this complexity, academic research by Kirti and Sarin (2024) finds that private equity involvement in insurance indeed has a nuanced effect on consumer welfare. On the one hand, holding riskier assets can boost yields, enhancing insurers' ability to offer more attractive returns to potential customers. On the other hand, it also increases the risk of insurers failing to meet their long-term obligations in the event of a major, unexpected shock—such as the GFC.
Transparency: A Growing Challenge
Echoing these concerns, Cantor noted that from Moody’s perspective, the decreased transparency poses significant challenges. Insurers once provided detailed asset-level disclosures, which are now often obscured by offshore arrangements or complex private asset management structures. This complicates market oversight, valuation accuracy, and consumer protection.
For consumers, this lack of transparency makes it difficult to determine whether higher returns offered to policyholders come at the cost of exposing them to greater risk—risk they may not be fully aware of.
Looking Ahead: Stability or Storm?
Concluding the session with a forward-looking assessment, panelists projected the commercial real estate debt market outlook for the remainder of 2025. The overall sentiment was one of cautious optimism for the second half of 2025, given significant capital that is still sitting on the sidelines and waiting for the right moment to be deployed. Cantor noted that, while the opacity associated with private debt valuations helps cushion lenders from marking down assets during times of stress, declining transparency poses challenges for oversight and may mask underlying risk.
Conclusion
The intertwining of private equity, insurance capital, and structured commercial real estate lending represents one of the most important yet intriguing developments in financial markets since the GFC. As insurers increasingly operate like private credit firms and private equity firms become more like insurers, the implications for market stability, regulatory frameworks, and transparency are profound and multifaceted.
References:
- Kirti, Divya, and Natasha Sarin. "What Private Equity Does Differently: Evidence from Life Insurance," Review of Financial Studies, 2024.
- Foley-Fisher, Nathan, Nathan Heinrich, and Stéphanie Verani. "Are Life Insurers the New Shadow Banks?," Working Paper, 2023.
