Iowa insurance commissioner, Doug Ommen, has warned that a “transformation” in the sector has pushed insurers into riskier private investments that are “less appropriate” for retirees.
Speaking to the FT, Ommen said the change in the retirement insurance business dated back to when “companies like Apollo, that had come out of private equity…got directly into the business of having an ownership interest in insurance companies”.
Insurers guaranteeing the retirement income of millions of Americans have in recent years shifted the investments backing those promises from government and corporate bonds into higher-yielding private credit loans and complex bundled securities.
They have also moved more than $1tn of policyholder obligations to fast-growing offshore reinsurance hubs such as Bermuda and the Cayman Islands.
“With appropriate risk management, it is a positive,” Ommen said of the sector’s pivot into private investments, pointing to the diversification and higher returns those assets could offer.
However, “there’s a wide variety of quality” in the complex securitisations that were now appearing on insurers’ balance sheets, he added. “Some of these lower tranches are less quality, and therefore less appropriate.”
