Apollo and KKR-linked insurance structures have been singled out for scrutiny by US state insurance regulators, who have warned of "circular ownership" and interconnectedness risks building up in fast-growing securitised investments held on insurer balance sheets.
The concerns are set out in documents released by the National Association of Insurance Commissioners (NAIC) ahead of its summer meetings. The NAIC, the standard-setting body through which state insurance regulators coordinate industry rules including capital requirements, is not itself a regulator, but its working groups shape the standards individual state regulators apply.
According to people familiar with an NAIC working group's focus, the scrutiny extends to Apollo Multi-Asset Prime Securities (AMAPS), a structured credit product Apollo built for its insurer Athene, as well as KKR securitised asset and private equity funds known as "Thunderbird" and "Lightning," in which KKR's insurer Global Atlantic has invested. These multi-asset securitisations slice stakes across multiple funds holding a mix of assets, from credit card debt and mortgages to private equity fund stakes and direct loans to middle-market companies. Asset managers have marketed the structures as offering higher returns than traditional structured debt while still securing strong ratings from major credit agencies, a combination that has drawn life insurers seeking long-dated assets to match decades-long obligations to policyholders and to support returns marketed on annuities sold to retirees.
The NAIC documents describe a specific risk in which a multi-collateral structure could invest in an asset that itself holds a stake in that same structure, producing circular ownership. Regulators also flagged a broader risk that as the asset class expands, separate investment vehicles could end up holding the same underlying assets, or stakes in each other, increasing interconnectedness across insurer portfolios. The people familiar with the working group's plans said it was preparing to request greater disclosure of the assets underlying these and similar structures, though no request has yet been finalised.
Separately, regulators said they had identified problems in some insurers' multi-asset investment vehicles concerning maturity mismatches, where structures promise decades-long returns but rely on underlying assets that mature well before those obligations fall due, raising questions about insurers' ability to source comparably profitable investments once the earlier assets have matured.
Apollo, in a statement, said its multi-asset securities carry diverse holdings and highly rated collateral with less leverage than comparable products, and have already been reviewed by regulators, characterising critics of the structures as uninformed. KKR declined to comment on the matter.
The disclosures point to a widening gap between how these securitisations are rated and marketed and how regulators assess the risk embedded within them. Should the NAIC working group move from investigation to a formal disclosure request, insurers holding AMAPS, Thunderbird, Lightning or comparable multi-asset structures would face additional reporting obligations around the composition and interlinkages of underlying collateral.
