Private credit on insurers' balance sheets

The merger of Apollo Global Management and the insurer Athene, completed in January 2022, put a private credit manager and a holder of annuity liabilities under one roof, a model widely copied since across the American and Bermudian annuity markets. Private credit means loans made outside the listed bond market, to mid-sized companies or to projects, and held to maturity. The asset-liability logic is plain: a long, predictable liability needs no daily liquidity, so the insurer collects the premium paid to whoever gives up the right to sell. The risk changes shape. It moves from a price observable every day to a valuation and selection risk, since the value of an unlisted loan comes out of a model, which smooths reported volatility without taking anything off the eventual loss. Correlation with the cycle is also stronger than the rating suggests, and concentration builds up by manager, with several insurers able to hold the same borrowers through different vehicles. European and American supervisors have made it an explicit focus of their prudential reviews.