The influx of private equity into the U.S. life insurance and annuity market has altered what has traditionally been viewed as the safe and secure sector of the financial marketplace. In this new era, U.S. life insurers—mainly acquired by or partnered with private equity firms—have progressively shifted risk offshore, primarily to Bermuda in the initial years.

Although regulators and credit rating agencies have issued quiet warnings, some astute analysts have started to raise serious alarm bells. One analyst following changes in reinsurance practices sees a growing risk in the new business model. Kerry Pechter, editor of Retirement Income Journal, appropriated the “Bermuda Triangle” metaphor to help his readers grasp a complex strategy. Instead of ships and planes disappearing, this Bermuda Triangle threatens the disappearance of transparency and, potentially, liquidity.

The Bermuda Triangle Strategy: Private Equity, Private Credit in the Life Insurance Business

The Bermuda Triangle is shorthand for a three-cornered business strategy involving a large asset manager, a U.S. life insurer, and a reinsurer based in an offshore regulatory haven. These asset managers are typically leading players in the private equity and private credit markets. The asset manager buys a life insurer and manages its assets. The life insurer sells annuities to U.S. retirees, generating a steady funding stream, then allocates those funds to the affiliated asset manager’s high-yield “alternative” assets while reinsuring its downside risk with an offshore reinsurer in a jurisdiction like Bermuda or Grand Cayman.

In a conversation with The National Law Review (NLR), Pechter discusses the rapid growth of the Bermuda Triangle strategy: “Many asset managers and life insurers have adopted pieces of this strategy. But in the Triangle’s purest form, all three entities are in the same holding company, managed by the same executives.” He adds, “There’s a core group of maybe half a dozen full-blown Bermuda Triangle companies which are all controlled by household names in the private equity world,” including Apollo, KKR, Ares, Blackstone, Brookfield, and Carlyle Group. 

Apollo was the pioneer of the Bermuda Triangle strategy. In 2009, the private equity giant established an insurance arm, Athene, to tap into the stable pool of cash offered by annuity sales in order to fund its aggressive growth. 

An Industry Giant Emerges

Athene expanded rapidly over its first decade, and by 2022, Apollo and Athene had fully merged into a single entity. According to the Wink’s Sales and Market Report for the third quarter of 2025, Athene ranked No. 1 out of 139 top annuity providers in the U.S., recording total year-to-date sales of $27.7 billion and a market share of over 8%. Athene now accounts for just under half of Apollo’s $908 billion assets under management and about two-thirds of its earnings.

Observing the rapid growth of Apollo and Athene, others jumped in to replicate the Bermuda Triangle strategy. More private equity firms started buying life insurers, raising capital by selling annuities to older Americans. They used some of that capital to finance their private credit lending and set up offshore reinsurers, freeing up more capital to finance new annuity sales. These combined activities enabled insurers like Athene to engage in even more aggressive tactics in selling annuities. 

But by employing the Bermuda Triangle strategy, these firms evade the full scrutiny of the individual state regulators who are responsible for protecting annuity holders in the U.S. As a result, the guardrails normally expected by policyholders and annuitants have eroded.

Conflicts of Interest

In a recent report, the Bank of International Settlements (BIS) addresses the structural shift that private equity has brought to the life insurance sector. Noting how offshore reinsurers have been used to provide capital relief for insurers acquired by, or partnering with, private equity firms, the BIS notes how the Bermuda Triangle strategy has “created potential conflicts of interest,” which increases exposure to “market shocks and liquidity stress.” The conflict arises because the private equity-backed insurers have a strong incentive to originate risky investments and stuff them into portfolios that back up the retirement annuities they sell. 

While firms like Apollo have been highly successful using the Bermuda Triangle strategy, there have been a few recent failures, giving cause for concern to some analysts. Pechter expresses a degree of trepidation as more private equity and private credit firms follow in the footsteps of Apollo. “When people see big players succeeding like this, there is a danger of copycats and frauds entering the sector. There would be many places for them to hide what they’re doing within the Bermuda Triangle. That’s the attraction of it.”

Canary in the Coal Mine?

The fall of PHL Variable Insurance Co. has become a cautionary tale. Owned by the private equity firm Golden Gate Capital, PHL was placed into rehabilitation in May 2024 by its home state of Connecticut, and authorities are now grappling with a $2.2 billion hole in the company’s accounts. Payouts to policyholders have been limited, effectively withholding nest eggs worth at least $400 million. 

Another private equity firm, 777 Partners, deployed the Bermuda Triangle strategy to fund a series of risky bets that did not pay off. 777’s offshore reinsurer eventually had its license revoked by the Bermuda Monetary Authority in October 2024, which found it had invested too much in affiliated assets, suffered from inadequate corporate governance, and had not received sufficient capital contributions from its parent company. This left U.S. insurers scrambling to recover assets, and 777 later collapsed. 

The Financial Stability Oversight Council (FSOC) recently warned that the increasing use of offshore reinsurers “could increase U.S. insurers’ counterparty risk and possibly open an avenue for contagion risk in times of stress.” The question is whether PHL and 777 are isolated examples of mere corporate failure, or signs that the Bermuda Triangle strategy itself is such a risky practice that other firms could face a similar fate, with dangerous downstream effects for policyholders, regulators, and connected industries.

Lack of Transparency

For Tom Gober, a forensic accountant and certified fraud examiner who has spent 40 years focusing on the insurance industry, the danger of the Bermuda Triangle strategy is simply about whether policyholders will be timely paid what they were promised, in full. There’s a real possibility, if additional insurance companies fail to meet their financial obligations to their policyholders, that individual state regulators in the U.S. would end up at odds with offshore regulators. He told the NLR: “Given that the regulators of each state in the U.S. are charged with protecting U.S. policyholders, why is Bermuda, with its less stringent regulations, deciding whether policyholders are paid back timely and in full? That’s ridiculous

Offshore jurisdictions like Bermuda have regulatory environments that allow firms employing the Bermuda Triangle strategy to take greater risks. Smaller capital requirements and significantly lighter reporting requirements are both attractive for private equity firms. The lack of transparency offered by offshore havens makes it more difficult for regulators to monitor what is going on. “When policyholder liabilities are moved to Bermuda,” Gober continues, “there’s no full accounting to regulators. For example, where Bermuda requires only roughly sixty pages of financial disclosure, U.S. regulators require thousands.”

The absence of meaningful transparency in reporting means that a Bermuda reinsurer could be taking on dangerous risks without the policyholder or U.S. state regulator being aware of it. “They don’t provide those specifics,” Gober explains. “They could be assuming the worst risks imaginable, from who knows where? That company could be exposed to things we have no idea about.”

This lack of transparency is even more concerning given the industry’s heavier reliance on reinsurance over the past decade. The FSOC’s 2025 Annual Report states that in 2024 U.S. life insurers ceded $2.4 trillion of reserves to reinsurers, a 70% increase from $1.4 trillion in 2019. Over that same period, reserves ceded to offshore jurisdictions more than doubled to over $1.1 trillion. Currently, most of this capital transfer goes to reinsurers domiciled in Bermuda. In addition, nearly 70% of life and annuity reserves ceded offshore go to affiliated reinsurers, and insurers with asset managers or private equity sponsors comprise 46% of reserves ceded to such offshore affiliates.

The FSOC report identifies an increased risk that the Bermuda Triangle strategy poses to the industry, explaining: “offshore reinsurers may be required to hold fewer reserves than U.S. insurers and reinsurers… that could potentially erode policyholder protections.” The lack of transparency that offshoring facilitates only adds to a systemic vulnerability.

Wolf in Sheep’s Clothing

U.S. life insurance companies have historically enjoyed a high degree of trust among retired Americans looking to buy annuities. But private equity firms have muscled into the industry and found ways to push these retirement savings into complex credit instruments, often without their knowledge.

For Pechter, the purchase of these insurance companies by private equity firms chasing yield with riskier investments is akin to putting “sheep’s clothing around a wolf.” He worries about risks that are hard to quantify or even to see. The kid-gloves approach of offshore regulators allows the aggressive investment strategies that underpin the private equity and private credit sectors to remain hidden from the view of policyholders and U.S. regulators. Pechter points to the PHL failure as an indication that the risk of an insurer being unable to pay policyholders what they are owed “is a real possibility.”

Gober, who believes that the collapse of another insurer is “inevitable at some point,” outlined what this could mean for policyholders. He said: “If U.S regulators have to put a U.S. insurer enmeshed in a Bermuda Triangle strategy into receivership, how will Bermuda respond? They will most likely take legal action to protect assets of the Bermuda-based subsidiary. U.S. state regulators will try to recover funds, but they’ll have to get in line at a foreign court. After expensive and protracted litigation overseas, they will be lucky to repatriate pennies on the dollar for U.S. policyholders.”