Private Equity’s Insurance Bets Raise Risks, BIS Researchers Say

Private equity firms have changed the business models of life insurers they invest in, posing risks that are more likely to materialize with higher interest rates, according to researchers at the Bank for International Settlements.

Buyout firms channel the insurance industry’s investments into private markets and contribute to a rising reliance on complex reinsurance agreements where insurers assume liabilities from competitors in exchange for the assets backing them, according to an article in the BIS quarterly review.

Private equity heavyweights have spent years acquiring insurers as a way of gathering more capital they can plow into alternative assets. While ...