October 2026
Background
The convergence of insurance and private capital is no longer an emerging theme.
In the US, the ‘Apollo playbook’ has become a blueprint for large-scale insurance-sector investment, whilst the UK bulk purchase annuity (BPA) market is being shaped by headline acquisitions of market incumbents: Athora completed its approximately £5.7 billion acquisition of Pension Insurance Corporation on 27 March 2026, and Brookfield Wealth Solutions completed its approximately £2.4 billion acquisition of Just Group on 1 April 2026.
However, the deeply intertwined relationship between insurers and private capital extends beyond an asset manager acquiring an insurer to manage its balance sheet. Private capital is entering the UK insurance market in myriad ways, including: (i) minority investments; (ii) sidecars; (iii) participation in the Lloyd’s insurance market, including through the transformer vehicle London Bridge 2; and (iv) strategic reinsurance relationships. As stated in the PRA’s Discussion Paper (DP2/25) ‘Alternative Life Capital: Supporting innovation in the life insurance sector’, alternative structures such as reinsurance sidecars and strategic joint ventures are increasingly popular amongst insurers for accessing external capital.
Unsurprisingly, the relationship is particularly developed in life and retirement markets characterised by large insurance books backed by long-term assets. Asset managers have identified these markets as opportunities to demonstrate their capabilities in originating higher-yielding assets that remain suitable for supporting insurance risks. These investment strategies can create real value for both entities and, if carefully managed, could be tailored to ensure compliance with regulatory expectations.
The Rise of Private Credit
A prime example of this trend is the rise of private credit in the investment portfolios of UK and EU insurers.
As reported by the FT in July, UK insurers specialising in pension risk transfer deals have increased their allocations to private loans as they seek longer-term debt to match their insurance liabilities.
In Europe, private credit is also becoming a meaningful part of insurance portfolios. EIOPA reported that EEA insurers and reinsurers held more than €500 billion of private-credit investments at year-end 2025, representing approximately 5% of total assets.
Recent regulatory reforms may facilitate further growth in UK and EU insurers’ allocations to private and structured assets. These include the expansion of UK matching adjustment (MA) eligibility to assets with highly predictable cash flows under reforms set out in PRA Policy Statement PS10/24 and reduced capital requirements for STS and non-STS securitisation positions under the revised EU Solvency II framework, which takes effect from 30 January 2027.
Against this background, the key legal question is increasingly not whether an insurer and an asset manager should work together, but how that relationship should be designed.
Commercial Structure: The Initial Question
There is no single model for an insurer–private capital relationship. The parties can select from a range of structures tailored to their respective commercial objectives.
Relevant considerations include the size and duration of the investment, the parties’ respective risk appetites and target returns, regulatory requirements, their preferred lines of insurance business, and the nature and composition of the originated assets in the proposed investment portfolio. The commercial structure is also shaped by the asset manager’s desire to earn additional income through managing the investment assets.
For example, in certain instances, investment via a sidecar can suffice to achieve the asset manager’s economic aims, whereas equity ownership is required in others.
For a minority strategic partnership, the parties should structure the documentation in three layers:
- If the asset manager makes an equity investment, the equity documentation will establish the nature of the ownership interest and the corresponding governance rights.
- Irrespective of the nature of the transaction, the parties will draft and negotiate a strategic Framework Agreement designed to capture the long-term commercial bargain, including matters such as minimum fees, exclusivity, deployment expectations, and termination economics.
- The parties can also agree an Investment Management Agreement (IMA), which governs the insurer’s outsourcing of its investment management function to the asset manager. Key terms will include investment management fees and the strategic asset allocation supporting the insurance liabilities.
This separation is important; the interaction between the minority interest (which may entitle the asset manager to certain governance rights and reserved matters) and the investment management services will be a particular point of focus for the applicable regulator. The principal regulatory concern is how conflicts of interest are managed within the insurer’s governance and risk management structure. The agreements governing these aspects of the transaction must therefore be drafted to withstand regulatory scrutiny applied during a change in control or authorisation process.
Although the Framework Agreement offers flexibility in documenting the wider commercial bargain, its provisions should be assessed alongside the equity documentation and IMA. In particular, fee commitments, exclusivity and termination economics should not, in practice, prevent the insurer from exercising independent judgement or taking action required to meet its regulatory obligations.
A useful starting question is therefore: what is the minimum level of corporate integration required to deliver the commercial relationship that the parties want?
Control Should Be Determined Early
A key consideration is whether the asset manager is intended to acquire ‘control’ in the insurer for regulatory purposes.
In the United Kingdom and Europe, a holding of 10% or more of the shares or voting power in an insurer or its parent will constitute a control interest under local insurance law. A smaller individual holding may nevertheless give rise to control where it is aggregated with the holdings of persons ‘acting in concert’ with it. Alternatively, a regulator may identify a ‘control’ interest where the asset manager’s shareholding or voting power confers ‘significant influence’ over the insurer. In making this determination, the regulator will consider accompanying board appointment powers, shareholder consent rights, and the impact of the IMA on how the insurer’s business is run.
The governance, economics and investment management aspects of the arrangement should therefore be negotiated together as part of a coherent process.
Regulators in key insurance hubs, including the UK, Bermuda and the EU, are also converging in their approach to these arrangements. Our previous article relating to EIOPA’s 2026 Consultation Paper on PE in Insurance discusses supervisory focus on PE ownership, governance, business model changes, investment strategy, and the long-term financial position of insurers. This focus means cross-border control structures should be designed to withstand scrutiny by the PRA and other regulatory supervisors.
Durability Without Captivity
The asset manager and insurer have different commercial objectives.
From the asset manager’s perspective, it is committing origination capabilities, dedicated investment staff, and its technology and regulatory infrastructure. The asset manager is only likely to consider this expenditure worthwhile in exchange for a substantial and durable pool of assets under management (AUM).
By contrast, whilst insurers benefit from this expertise, they retain regulatory responsibility for ensuring that their strategic asset allocations remain appropriate. As we describe here, insurers’ investments must be sufficiently secure, liquid and profitable, and their investment risks must be capable of being properly measured and monitored over time.
The parties’ respective interests must therefore be considered together in determining the investment management relationship.
The inclusion of certain terms, such as commitments to minimum AUM or fee underpins, can give the asset manager a degree of economic certainty. However, the drafting should also cover key considerations such as: (i) what counts towards AUM; (ii) how cash is treated; (iii) what happens if an asset ceases to be eligible for regulatory purposes (e.g., if an asset no longer meets MA criteria); (iv) whether assets moved between insurance affiliates remain within the commitment; and (v) what happens if the asset manager cannot originate sufficient qualifying assets.
Deployment obligations are particularly important. An insurer should be cautious about guaranteeing economics based on capital that the asset manager is not itself able to deploy into assets that satisfy the insurer’s requirements.
Exclusivity
Exclusivity can be valuable to both sides.
An asset manager that commits significant resources to an insurance relationship may reasonably want confidence that it will manage agreed strategies, without needing to consider competition from other providers. An insurer may want comfort that the asset manager will deploy its highest-yielding assets to the insurance portfolio, and that proprietary origination capacity will not be directed disproportionately to competitors.
However, broad exclusivity provisions can become problematic over time. An insurer can later find itself dependent on an asset manager whose pricing, product range, or capacity no longer suits its requirements. This can be due to market changes or shifts in the nature of the insurer’s books of business. An asset manager can find that a restriction negotiated around today’s competitors becomes commercially problematic as its insurance business develops.
Both parties therefore have an interest in ensuring precision in exclusivity provisions, particularly when defining asset classes, competitors, geographic scope, and regulatory exceptions.
Termination Rights and Economics
The parties’ termination rights are relevant from both economic and regulatory perspectives. The asset manager may be unwilling to invest in a long-term strategic relationship if the expected fee stream can disappear without economic consequence.
The parties therefore must identify which events should permit termination without compensation. Asset manager breach, persistent underperformance, regulatory concerns, and changes in law should each be separately considered as termination events in the agreement.
The termination right and the economic protection can be addressed in separate agreements. One approach is to preserve the insurer’s contractual ability to terminate the IMA whilst imposing agreed economic consequences for certain early termination events on the insurance holding company under the wider strategic agreement. However, such economic protection must not practically impede the insurer from terminating where this is required by law or regulation. Regulators are likely to consider the arrangements in the round, irrespective of which group entity bears the payment obligation.
As a further practical point, where an investment management mandate constitutes a material outsourcing arrangement, the parties should maintain a documented and tested exit strategy covering both stressed and non-stressed exits. The PRA expects that, in a termination scenario, the asset manager will assist the insurer in successfully carrying out an exit plan, which can include transferring outsourced investment management functions to a competitor.
The IMA as Regulatory Infrastructure
Calling the IMA ‘operational’ risks understating its importance.
For an insurer, the IMA is one of the principal ways in which regulatory, capital, and risk constraints are translated into portfolio management rules.
Investment guidelines should include clear guardrails relating to: (i) minimum ratings requirements; (ii) asset, issuer, and geographic concentrations; (iii) duration; and (iv) liquidity management.
Privately originated and structured assets increase the importance of this exercise. In the UK, the PRA has stated that it expects insurers to properly consider the cumulative impact of the incremental inclusion of strategic structured and synthetic investments into their portfolios.
Private credit can offer an attractive illiquidity or complexity premium, but the relevant question for the insurer is not simply whether an asset yields more than a public alternative. Capital treatment, valuation, liquidity, and liability matching can materially change the economics.
Conflicts of Interest
Strategic insurer–asset manager arrangements can produce conflicts that are more complex than those arising under an ordinary institutional mandate.
Amongst the principal conflicts are: (i) conflicts between the asset manager’s own origination activities and other clients, on the one hand, and its insurer client, on the other; and (ii) conflicts arising where an asset manager can appoint directors to the boards of insurance holding companies or operating entities.
From our own experience, an insurer’s continued ability to manage conflicts of interest effectively can be a gating item to change-in-control approvals, and significant changes to governance that weaken these controls are likely to face regulatory scrutiny. The conflict framework is therefore a core part of the regulatory case for the transaction.
In respect of the first conflict type, an affiliated or strategic asset manager may originate an asset, allocate it amongst several accounts, advise the insurer acquiring it and earn fees elsewhere in the structure. Accordingly, the insurer must ensure that it has visibility over the asset manager’s origination framework, and the asset manager must be transparent about asset allocation, valuation, and affiliated transactions.
From a governance perspective, regulators will expect insurers to retain the ability to make asset management decisions independently of the IMA arrangement. Conflicted directors should be identified and excluded from decisions where appropriate under a documented conflicts process, with approval resting with suitably independent decision-makers.
Operational Readiness
A transaction can be ready to close before the investment management platform is ready to operate.
Insurance reporting can differ materially from an asset manager’s ordinary institutional reporting. The asset manager may need new processes for statutory reporting, investment guideline monitoring, and performance testing. For example, UK and European insurers are required to ‘look through’ into fund structures as part of determining their regulatory capital requirements, which may increase the administrative burden on the asset manager.
Asset managers must be able to adhere to these requirements from the outset, and the parties should maintain a constructive dialogue with each other regarding reporting requirements.
The insurer’s and asset manager’s systems also need to communicate with each other. Operational readiness should therefore begin during documentation, not after it.
Conclusion: Where the Market Is Heading
The next phase of convergence is likely to be less about whether private capital ‘owns’ insurance and more about how insurance balance sheets connect to private capital investment platforms.
These arrangements only work if the corporate rights, commercial commitments and investment mandate are designed together. The objective is to provide sufficient durability to justify the asset manager’s investment whilst preserving the insurer’s independent judgement, regulatory accountability, and practical ability to change course.
This balance should be tested early across the control analysis, governance, conflicts, asset eligibility, operational readiness, and exit arrangements. If those issues are deferred until documentation or regulatory review, they can become both approval and execution risks.