Iowa’s top insurance regulator issued a stark warning Tuesday, saying a sweeping transformation in the U.S. retirement insurance industry has pushed policyholder funds into riskier, less transparent private market investments.
Iowa Insurance Commissioner Doug Ommen told the Financial Times that the shift began when private equity-backed firms like Apollo Global Management Inc. (NYSE:APO) took direct ownership stakes in insurance companies, redirecting premiums into higher-yielding private credit loans and complex structured securities rather than traditional government and corporate bonds.
Iowa state hosts $1.3 trillion in insurance assets and oversees $449 billion in reserve funds held with offshore reinsurers, per S&P data. Ommen acknowledged a tension at the heart of his own role. “I know the contracts a lot better than the balance sheet behind the contracts,” he said.
Offshore Liabilities, Onshore Policyholders
Insurers have offloaded more than $1 trillion in policyholder obligations to offshore reinsurance hubs, including Bermuda and the Cayman Islands. Ommen flagged the Cayman Islands specifically, saying the jurisdiction is “just not as transparent.”
KKR & Co Inc. (NYSE:KKR), Blackstone Inc. (NYSE:BX), and Brookfield Asset Management Ltd. (NYSE:BAM) have all acquired or struck investment management deals with U.S. insurance groups, many headquartered in Des Moines.
A Crisis In The Making?
Investor Steve Eisman, who predicted the 2008 mortgage crisis, has called private credit’s grip on life insurance “a slow brewing scandal” that could one day spark a full financial crisis. Forensic accountant Tom Gober alleged that in one case, $7 billion in liabilities were backed by just $200 million in real assets with the remainder filled by instruments he compared to a lottery ticket before the drawing.
U.S.-based captive reinsurance grew from $12 billion to $440 billion in a single decade before the industry moved offshore as regulators started asking questions.
Economist Mohamed El-Erian has warned that in finance, risks don't cancel out they compound. With stress building in private credit alongside rising geopolitical tensions in 2026, that warning is becoming increasingly relevant.
U.S. annuity sales hit $464 billion last year as baby boomers seek guaranteed retirement income. Ommen stopped short of predicting a crisis but conceded: “Until you actually go through that scenario, you don’t really know.”
Disclaimer: This content was produced with the help of AI tools and was reviewed and published by Benzinga editors.
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