Wall Street firms like KKR & Co. and Apollo Global Management Inc. are finding a new source of capital: the savings held within Japanese life insurance companies. These firms are structuring deals to manage billions of dollars backing life and annuity policies.
In a process called reinsurance, Japanese insurers are reducing their financial risk by transferring some of their liabilities for future benefits to the money managers’ insurance divisions. The original insurers continue to manage policies and make payouts, but in return for assuming some of the financial burden, the money managers receive a portion of the insurers’ assets. They are gambling the assets can generate returns exceeding the payout obligations for retirement and death benefits.
A significant amount of this capital is then directed towards private credit, a currently high-yielding investment. This is a strategic move for alternative investment managers seeking to expand their portfolios.
