A surge of private credit entering the global reinsurance market is pushing traditional reinsurers into riskier lines of business and fueling concerns about weakened underwriting discipline, senior industry executives have warned.
Private capital firms — including major players such as Apollo, KKR, and Blackstone — have expanded aggressively into the $2 trillion property and casualty (P&C) sector. They are doing so through both direct acquisitions and by providing reinsurance capital via asset-management agreements that operate under lighter regulatory oversight.
Private Credit Is “More Aggressive,” CEOs Say
Speaking at the Financial Times/PwC Insurance Summit in Bermuda, Kevin O’Donnell, CEO of RenaissanceRe, said private credit groups are rapidly shifting focus from the life insurance sector into the casualty market.
“Private credit is being much more aggressive,” O’Donnell said. “Because they’re not regulated reinsurance companies, they can operate with far more leverage and a different investment appetite.”
He described the trend as a form of regulatory arbitrage, with private firms benefiting from far fewer investment restrictions than traditional reinsurers.
Expanding Beyond Life Insurance
Life insurance has historically been the natural home for private credit investments, as life insurers have longer-term liabilities to match the illiquid loans these firms originate. But private capital is increasingly moving into P&C reinsurance, a sector with shorter-term policies and more volatile losses.
Recent deals include:
- KKR’s acquisition of a stake in Peak Re (October), giving it exposure to Bermuda’s casualty reinsurance market.
- Blackstone’s agreement to invest up to $170 million in specialist insurer Fidelis, supporting a structure focused on longer-term and casualty business.
Scott Egan, CEO of SiriusPoint, cautioned that casualty insurance carries hidden risks:
“We won’t know the cost of manufacture for years,” he warned, referencing recent multibillion-dollar losses from large U.S. legal claims.
Private Capital Now Shapes Underwriting Strategy
Private credit and hedge funds had built roughly $115 billion in P&C reinsurance exposure as of last year, according to Aon. This influx has pushed down reinsurance prices, even as global risks — from climate change to cyber attacks — intensify.
Reinsurers say that as private investors’ priorities begin influencing underwriting, there is growing concern that investment targets, rather than risk management, are driving business decisions. One executive warned the dynamic could lead to “the tail wagging the dog.”
Rise of MGAs Raises Fears of Undisciplined Growth
As competition intensifies, insurers are increasingly turning to managing general agents (MGAs) — intermediaries that originate policies but pass all risk to insurers and investors.
Key trends:
- MGA premiums more than doubled in five years, reaching $114 billion in 2024, according to Conning.
- MGAs face lighter solvency and regulatory requirements because they do not retain risk.
- Their valuations often exceed traditional insurers’, making them attractive targets for private equity buyers.
- Their fee-based business model gives them weaker incentives for prudent underwriting.
“Valuations around MGAs are just astronomical,” said Maamoun Rajeh, president of Arch Capital. “Once you disconnect underwriting discipline from growth and fees, you accelerate the lack of discipline.”
S&P Global has also warned that MGAs may introduce vulnerabilities including fraud, misaligned incentives, and poor underwriting standards.
Recent Failures Illustrate the Risks
The industry was shaken by the collapse of Vesttoo, an Israeli AI-based capital provider to pass-through insurers. Vesttoo went bankrupt after admitting that key documents underpinning its transactions had been falsified, implicating major reinsurance groups including Aon and SiriusPoint.
Christian Dunleavy, group president of Aspen, issued a stark warning on the rapid growth of MGAs:
“It usually ends well for MGAs — badly for balance sheets.”
