When the possibility of 777 Partners’ acquisition of Everton was first mooted, the subsequent investigations, here, and continuing with Josimar and the likes of Paul Brown, opened up a world in which more than two years ago, set alarm bells ringing. Those alarm bells continue to ring, and whilst thankfully from an Evertonian’s perspective those days have passed, there’s still plenty of private credit exposure in football,  and obviously in the global economy.

What seems an obscure, somewhat irrelevant corner of global finances has real world consequences. To date the tsunami of problems it will bring has not reached our shores (we have many other problems to deal with), but it’s coming and has potentially huge consequences generally, and specifically in football financing.

Since the 2008 global financial crisis, there has been a persistent migration of credit intermediation from the banking sector to the more opaque realm of non-bank financial institutions.

 Within this landscape, the US life insurance industry, the offshore reinsurance market, and the burgeoning private credit sector has emerged as a focal point for systemic risk analysis. 

Private credit, which refers to lending to companies by institutions other than banks, has expanded from a niche alternative asset class to a global market estimated at $2.1 trillion to $3 trillion as of early 2025. This growth is not merely a reflection of increased capital supply but represents a qualitative shift in how long-term liabilities, primarily annuities and pension obligations, are funded and managed. The integration of private equity firms into the insurance value chain has accelerated these trends, creating complex, multi-jurisdictional structures that facilitate asset-intensive reinsurance and leverage significant regulatory differences between the United States and offshore financial centers like Bermuda and the Cayman Islands.

Evolution and scale of private credit in the insurance market

The ascent of private credit as a primary investment vehicle for life insurers is rooted in the search for yield that defined the post-crisis era of prolonged low interest rates. 

Traditional fixed-income assets, such as US Treasuries and public corporate bonds, increasingly failed to provide the necessary spreads to cover the guarantees embedded in legacy annuity contracts. 

Private credit stepped into this void, offering an illiquidity premium and floating-rate structures that provided protection against interest rate volatility. By the end of 2024, the private credit market had reached approximately $2 trillion, with projections suggesting a trajectory toward $5 trillion by 2029.

Life insurers have become some of the largest providers of private credit through private placements. Research indicates that life insurers increased their lending in the private placement market from $386 billion in 2014 to $849 billion in 2024, with these assets now accounting for 14% of their general account portfolios. 

This growth is particularly pronounced among private equity-owned insurers, whose share of private placement assets expanded by 7 percentage points more than non-PE-owned peers between 2017 and 2024. The following table contextualises the scale and projected growth of this market relative to other debt instruments.

The entry of alternative asset managers into the insurance sector has transformed the traditional business model. Since 2012, PE ownership of assets in the US life and annuity market has rocketed from less than 0.1% to over 10.1% by 2023. Between 2019 and 2024, life insurance mergers and acquisitions totaled over $150 billion, with approximately half of that volume directly linked to private equity firms. 

These firms leverage the steady stream of permanent capital provided by policyholder premiums to finance aggressive investment strategies, primarily in private credit and structured finance.

The characteristics of these investments often diverge from traditional public market assets. Private credit yields typically offer a spread advantage of 80 to 156 basis points over comparable public corporate bonds and asset-backed securities, reflecting compensation for lower liquidity and higher complexity. While the majority of these investments are classified as investment grade, with AXA reporting that 84% of its private credit portfolio is investment grade, there is growing scepticism regarding the independence and transparency of these ratings, which are increasingly provided by private rating agencies rather than the established public ones.

Reinsurance and the Bermuda triangle strategy

A critical component of this ecosystem is the use of affiliated or captive reinsurers in offshore jurisdictions. This practice, often referred to as the Bermuda Triangle strategy, involves a triad consisting of an alternative asset manager, a US-based life insurer issuing annuities, and a Bermuda-based reinsurer that assumes the risk and manages the supporting assets. 

This strategy allows insurance groups to move capital-intensive liabilities off their US balance sheets while keeping fee-generating assets under management.

By 2024, US life insurers had transferred nearly $800 billion in reserves to offshore affiliates, with the largest share going to Bermuda. Bermuda’s attractiveness is rooted in its economically based regulatory framework, which offers greater flexibility than the more formulaic and rules-based US National Association of Insurance Commissioners (NAIC) standards. This flexibility extends to the valuation of liabilities and the treatment of complex, illiquid assets.

The mechanisms of these transfers often involve complex accounting treatments such as modified coinsurance (modco) or funds withheld reinsurance. In these arrangements, the assets supporting the reserves may remain on the books of the ceding US insurer, but the investment risk and income are transferred to the reinsurer. 

This allows the insurer to maintain a capital-light profile. For example, some prominent insurers in this space operate with surplus ratios as low as 2.4%, compared to the 2024 life insurance industry average of 7.2%. Critics argue that this creates financial high blood pressure, where the lack of a sufficient capital buffer increases the risk of insolvency during credit crises.

Regulatory scrutiny and the adequacy of current frameworks

The rapid growth of the private credit-insurance nexus has prompted a somewhat delayed response from regulators. The primary concern is that existing frameworks may not accurately capture the risks of hidden leverage, valuation uncertainty, and the inherent conflicts of interest when an asset manager owns the insurer it provides credit to.

The NAIC has launched a multi-year project to modernise investment oversight, focusing on structured securities and private credit. A cornerstone of this effort is the Principles-Based Bond Definition, which became effective on January 1, 2025. The PBBD shifts the regulatory focus from the legal form of a financial instrument to its economic substance. 

To qualify as a bond for statutory reporting, a security must represent a true creditor relationship. Instruments with equity-like characteristics or those that fail to demonstrate meaningful, recurring cash flows must be reclassified to Schedule BA, which typically carries significantly higher capital charges.

Furthermore, the NAIC has targeted capital arbitrage in collateralised loan obligations (CLOs). Historically, insurers could avoid high capital charges on CLO equity tranches by holding them through Business Development Companies (BDCs) or other opaque structures. In response, the NAIC adopted a new 45% Risk-Based Capital (RBC) charge for residual tranches in all structured securities in 2024. Additionally, the NAIC is moving toward direct modeling of CLOs by the Structured Securities Group, effective in 2026, to ensure that capital requirements reflect underlying credit risk rather than relying solely on commercial ratings.

Collateral loan factors and look-through mechanisms

The regulation of collateral loans, a major component of private credit exposure, is also under revision. Previously, these loans were subject to a flat 6.8% RBC factor regardless of the underlying collateral. As of early 2026, the Life RBC Working Group has reached a consensus on assigning granular RBC factors based on collateral type. For example, collateral loans backed by residual interests may soon face a 36% RBC charge, while those backed by joint venture (JV) or limited liability company (LLC) interests could be charged at 24%.

A proposed formula for these charges utilises a generic haircut to account for Loan-to-Value (LTV) protections. The RBC factor for a collateral loan can be expressed as:

This “80% multiplier” reflects the maximum LTV permitted in many state insurance codes and is intended to prevent insurers from using collateral loans to access high-risk equity while obtaining favorable bond-like capital treatment.

Global supervisory divergence

While the US has focused on formulaic RBC adjustments, Bermuda has emphasised its scenario-based approach and best estimate liability metrics. The Bermuda Monetary Authority (BMA) introduced a prudent person principle and expanded disclosure requirements in response to international pressure. 

However, differences in the discounting of liabilities remain a point of contention. Bermuda’s framework often results in lower reserve requirements, which ceding US insurers exploit to enhance their profitability. 

The IMF has identified this as a potential contagion risk, noting that the concentration of risks within a limited number of offshore jurisdictions could amplify systemic shocks.

Systemic risks

The primary concern for financial stability is not necessarily the failure of a single institution but the potential for a synchronised stress event across the highly interconnected private credit ecosystem. The IMF and the Federal Reserve have identified several frailties that could serve as catalysts for systemic disruption.

Liquidity risk and redemption mismatches

Private credit investments are inherently illiquid, often held to maturity with an average duration of 4.4 years. While life insurers generally have long-duration liabilities, the rise of institutional investment products, such as those sold to pension funds, has introduced a potential liquidity mismatch. 

In early 2026, market volatility led to a test of these structures when Blue Owl Capital sold $1.4 billion of assets and restricted quarterly withdrawals from several private debt funds.

If a significant number of policyholders or institutional investors were to seek redemptions simultaneously, insurers might be forced to sell their most liquid assets (e.g., public corporate bonds and Treasuries), leaving their remaining portfolios heavily concentrated in illiquid, hard-to-value private credit. This liquidity spiral could be exacerbated if private credit funds enforce redemption gates, as observed in the case of Blue Owl.

Credit quality and the AI bubble concerns

The rapid expansion of private credit has occurred in a relatively benign credit environment. As the cycle matures, there are growing fears that underwriting standards have deteriorated. Specifically, the heavy concentration of private credit lending in the technology sector, where AI infrastructure spending has reached record levels, poses a significant risk. If AI-driven productivity gains fail to materialise, the ability of these firms to service their floating-rate debt could be compromised.

Recent defaults in sectors like auto parts (First Brands) and car dealerships (Tricolor) have already shaken investor confidence, highlighting the vulnerability of middle-market firms to higher-for-longer interest rates. The IMF has warned that more than one-third of private credit borrowers now have interest costs exceeding their current earnings, a situation that would worsen in an economic downturn.

Inter-connectedness with the banking system

The narrative that private credit has de-risked the banking system by moving lending off bank balance sheets is partially undermined by the extensive financial ties between the two sectors. Banks provide leverage to private credit funds through subscription lines, warehouse facilities, and revolving credit. Bank loans to non-depository financial institutions (including private credit intermediaries) doubled from $500 billion in 2019 to $1 trillion in early 2024.

The Federal Reserve’s 2025 stress tests concluded that the banking system could withstand crippling losses from private credit exposures, with a loss rate of 7% estimated for loans to non-banking financial institutions. However, some academic researchers argue that these tests do not fully capture the complex and arguably opaque structures through which leverage is recycled between insurers and their asset managers.

Valuation uncertainty and hidden leverage

A fundamental challenge in assessing the stability of private credit-reinsurance relationships is the lack of transparent, market-based pricing. Private market loans rarely trade and are typically marked only quarterly using risk models. This can lead to stale or subjective valuations that do not reflect real-time economic conditions.

Furthermore, hidden leverage is often embedded in structured investments. For example, a BDC might show a regulatory leverage ratio of 2:1, but when consolidated with its affiliated joint venture loan funds and CLOs, its effective leverage could reach as high as 12:1. This leverage amplifies both returns and potential losses, creating a fragility that may only become apparent during a major market dislocation.

Too little, too late?

The adequacy of regulation remains a subject of intense debate. While the NAIC and BMA have significantly expanded their oversight toolkits, some (including myself) argue that the measures are too little, too late. The logic is that the cat is already out of the bag: the hundreds of billions of dollars in offshore risk transfers and complex private credit investments are already baked in to the system.

Critics also point to the lack of enforcement power at the NAIC level, noting that it is a standard-setting body rather than a formal regulator. The actual oversight falls to individual state insurance commissions, which sometimes compete to attract insurers to their jurisdictions through favourable local interpretations of the rules.

Future of US reinsurance-private credit 

As the market proceeds through 2026, several diverging forces will shape the future of the sector. On one hand, the NAIC’s ongoing efforts to implement granular RBC charges and direct modeling of structured credit will increase the cost of capital for many asset-intensive reinsurance strategies. On the other hand, the US Treasury and FSOC have signaled a shift toward deregulation to promote economic growth, potentially clashing with state-level efforts to tighten oversight.

The evolution of the Bermuda Triangle model will likely depend on the continued availability of private equity capital and the stability of the tech-heavy private credit market. If interest rates remain elevated and defaults continue to rise, the all-weather nature of insurer portfolios will be put to its most rigorous test since the global financial crisis.

In conclusion, the US reinsurance industry’s exposure to private credit represents a significant structural shift in the financial system. While the move away from traditional bank-based lending has provided firms with new sources of capital and insurers with higher yields, it has also created a web of inter-dependencies that are increasingly difficult for regulators to map and manage. The adequacy of the current regulatory response remains unproven, and the potential for systemic risk, driven by liquidity mismatches, valuation opacity, and concentrated offshore exposure, will require vigilant monitoring and possibly more intrusive supervisory approaches in the years to come. The industry’s resilience during the next economic downturn will ultimately determine whether these innovations in asset-liability management were visionary strategies for a new era or merely a sophisticated form of risk-shifting that left policyholders and the broader financial system more vulnerable.