Funds backing individual annuity policies now represent more than 36% of the US life/annuity insurance segment's total reserves, up from 32% before the 2008 financial crisis, AM Best said in a new analysis that also flagged declining credit quality and growing dependence on offshore reinsurance among the carriers managing that money.
The report, titled "Credit Quality of Annuity Reserves Declined from 2007 to 2025 on the Credit Ratings Scale," found that a larger portion of these annuity reserves have shifted to companies with a credit rating nearly two notches lower on a weighted basis.
Roughly one-third of the segment's annuity reserves are now tied to 95 companies whose long-term issuer credit rating has fallen since 2007.
The findings land against the backdrop of a market that has never been bigger. US retail annuity sales rose 7% to $464.1 billion in 2025, marking a fourth consecutive year of records, LIMRA data shows.
Research from Harvard Business School, published last year, estimated that private-equity-backed insurers controlled roughly 25% of all U.S. individual annuity liabilities by 2024 and accounted for 35% of new fixed and fixed-indexed annuity sales, up from 7% in 2011.
AM Best attributed the credit quality deterioration to several factors: heightened reinsurance dependence, weaker financial flexibility, pressured internal capital, and a deterioration in asset quality.
Many of the larger carriers, often backed by private equity or asset management groups, have relied on offshore reinsurance with affiliated reinsurers for capital efficiency and tax benefits. Such cross-border reinsurance introduces operational complexity and opaqueness, the rating agency said.
PE-backed insurers have entered the market in the past five years as annuity premiums surged, using higher yields earned from private credit portfolios to offer elevated crediting rates and rapidly add market share.
A separate AM Best report from December highlighted related questions about affiliated investment practices. It found that affiliated investments among U.S. life/annuity insurers had surged more than 17% in 2024 alone to exceed $373 billion, averaging 13% annual growth over the previous six years.
AM Best noted that about a fifth of investments held by Apollo's Athene and KKR's Global Atlantic consisted of loans to affiliated funds.
The rating agency said it views a higher ratio of affiliated investments to capital and surplus as a signal of concentration, counterparty, and transparency risks.
