U.S. Regulators Flag Circular Ownership Risks at KKR and Apollo
Alina Collins
The NAIC has singled out securitised products under Apollo and KKR for circular ownership and maturity mismatch risks, signalling tighter disclosure and capital rules — a move that, if enacted, would directly curb one of the fastest-growing asset classes in insurance.
What exactly are regulators looking at?
The NAIC's focus is "multi-asset securitisations" — products that slice and bundle different asset types (credit-card debt, mortgages, private-equity fund stakes, direct loans) into a single security.
Named specifically: Apollo's AMAPS, built for its insurer Athene, and KKR's Thunderbird and Lightning securitised assets held by its insurer Global Atlantic.
These products carry high ratings from major agencies and are bought by life insurers to boost annuity returns — meaning the risk ultimately sits with policyholders' money.
Why is "circular ownership" dangerous?
Circular ownership means Product A invests in Asset B, and Asset B in turn holds a stake in Product A — capital loops in a closed circle, amplifying risk in ways outsiders struggle to detect.
This means → if any single link breaks, losses can cascade across insurance portfolios like dominoes.
The NAIC memo flags a key word: "interconnectedness." As the asset class expands, the risk of separate vehicles investing in each other keeps rising.
What is the maturity-mismatch problem?
Some insurers hold products that promise returns over decades, yet the underlying assets mature years or even decades earlier.
In plain terms = an insurer promises a client a 30-year annuity, but the assets backing it may mature in 10 years — no one guarantees equally profitable reinvestment after that.
This reflects a deeper issue: the high-yield promise rests on the assumption that future reinvestment returns won't fall — an assumption that is extremely fragile when interest rates shift.
How have the parties responded?
An Apollo spokesperson stressed that AMAPS holds diversified, highly rated collateral with low leverage and has already been reviewed by regulators, adding that "those who have done their homework recognise the transparency and value AMAPS brings."
But the statement's tone was also combative: "Those who believe AMAPS adds risk, regrettably, clearly do not understand the facts."
KKR declined to comment — a sharp contrast in posture between the two firms.
What happens next?
The NAIC working group has signalled it will push for fuller disclosure of underlying assets and may raise capital requirements.
This means → if enacted, the cost of holding these products rises for insurers, directly curbing the products' appeal.
But a caveat: the NAIC is not itself a direct regulator — it coordinates standards through state insurance regulators. Whether this warning translates into real tightening is the key test for this market's next chapter.
Content is for reference only, not financial advice.