Best’s Special Report: Private Equity and Asset Managers Are Driving Growth in Affiliated Investments

DECEMBER 11, 2025 07:21 AM (EST)

Best's Special Report: Private Equity and Asset Managers Are Driving Growth in Affiliated Investments

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OLDWICK - DECEMBER 11, 2025 07:21 AM (EST)
Affiliated investments among U.S. life/annuity (L/A) insurers have skyrocketed since 2018, and increased by more than 17% on an annual basis in 2024 alone to reach more than $373 billion, according to a new AM Best report.

According to the Best's Special Report, titled, "PE/AM-Backed Companies Are Driving Growth in Affiliated Investments," affiliated investments have increased by double digits in four of the past six years, averaging 13% annual growth over that time. The growth is being fueled by an influx of private equity/asset managers (PE/AM) acquiring insurers outright or securing ownership in parts of those insurance entities.

The analysis underlying the report included only labeled affiliated holdings and did not factor in related holdings or transactions, which would have pushed amounts higher. These affiliated investments, which involve Schedule BA assets, common stocks, bonds and short-term loans, comprised 76 percent of capital and surplus in 2024 for those companies with affiliated investments. This marked a sharp increase from 45 percent in 2018. The report suggests that if a parent/affiliate company experiences financial distress, negative impact to the insurers are heightened given the higher exposure levels to these affiliated investments.

"There are some concerns pertaining to affiliated investments that revolve around concentration risk, valuation, transparency and liquidity," said Jason Hopper, associate director, AM Best.

The report also notes that AM Best assesses a risk charge of 25% for affiliated bonds, in addition to the

baseline bond risk charges. Historically, most of the L/A industry's affiliated investments were held by publicly traded and mutual companies. At the end of 2024, PE/AM-backed insurers held a larger share of affiliated assets than their peers. As more PE/AM-backed companies entered the market, their strategy of using affiliated investments became a key driver of the increase. PE/AM-backed insurers rely on parent-affiliated asset managers, who not only oversee their investments, but also originate and structure the underlying funds and vehicles.

"A higher ratio of affiliated investments to total invested assets and capital & surplus can signal

concentration, counterparty, transparency, and regulatory risks," said Kaitlin Piasecki, industry research analyst, AM Best. "Higher ratios may also suggest that a company's operations are more intertwined with its parent and affiliated investment management firms, which originate, structure, and manage these assets."

To access the full copy of this commentary, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=360786.