Apollo Global Management Inc. has issued a stark warning regarding potential risks in the US insurance sector, drawing attention to the increasing migration of certain American insurers to the Cayman Islands. The firm suggested that this trend could mirror the abrupt collapse of Silicon Valley Bank (SVB), which previously triggered turmoil across regional banks.
In a presentation on Thursday, Apollo described the Cayman Islands as a “regulatory arbitrage hub” where insurance market risks are not sufficiently mitigated, and the liabilities of firms there may outstrip their available capital. The firm drew parallels between the 2023 downfall of SVB and the current offshore insurance landscape, cautioning that “the Cayman Islands could become the SVB moment for the insurance sector.” Apollo also highlighted that American insurers’ exposure to Cayman-based entities has more than doubled over the past two years, a figure that continues to rise.
The Cayman Islands Monetary Authority (CIMA) has responded by emphasising its robust regulatory framework. As a founding member of the International Association of Insurance Supervisors (IAIS) and with formal information-sharing agreements with US states, CIMA maintains ongoing collaboration with foreign regulators for firm inspections and evaluations. A spokesperson stated, “There is no basis for concern. While our regulatory structure differs from other jurisdictions, it is fully aligned with international standards and delivers the same supervisory outcomes as outlined by IAIS guidance.”
Apollo CEO Mark Rowan, speaking earlier this week at the Goldman Sachs Financial Services Conference, warned of potential future insolvencies in the Cayman Islands. “We have already witnessed three bankruptcies in Cayman, and there will be more. I do not believe the Caymans will be an effective jurisdiction for US insurance over the next 24 months,” he said.
In recent months, regulators, experts, and executives have raised concerns over private equity’s growing influence in the US life insurance sector and associated risks. In October, economists at the Bank for International Settlements drew attention to the use of offshore reinsurance, where capital regulations are more flexible than in the US. They highlighted not only the Cayman Islands but also Bermuda, where Apollo’s life insurance affiliate, Athene, maintains a reinsurance operation.
Apollo’s presentation further noted that major insurers, including Prudential Financial Inc. and MetLife Inc., also conduct operations in Bermuda. The firm underscored Athene’s strong A+ credit rating and $35 billion in regulatory capital, stressing that, despite being a highly regulated industry, the same policy protections apply for offshore reinsurance as in the US.