Private equity life insurers turn to Japan in latest reinsurance dealmaking

A pair of life insurers announced significant reinsurance deals this week with Japanese reinsurance companies.

Billion-dollar reinsurance arrangements are part of the new life insurance industry paradigm, driven heavily by private equity and alternative investment managers. The offshore reinsurance trend has regulators concerned enough to create a new guideline for asset adequacy testing of reserves backing these contracts.

Partnerships between insurers and alternative investment managers, increased use of offshore reinsurance platforms, and a fourth consecutive record year of annuity sales fueled reinsurance growth in 2024, Fitch Ratings said in a recent report.

Reserves ceded, measured by reserve credit and modified coinsurance reserves disclosed in insurers’ statutory financials, increased to $2.4 trillion in 2024 from $2 trillion in 2023, Fitch reported.

This week's transactions and the significant volume of reinsurance over recent periods have been motivated by Japanese insurers seeking capital relief given the implementation of the Economic Solvency Ratio, making holding certain liabilities with guarantees more onerous, explained Jamie Tucker, senior director for life insurance at Fitch Ratings.

"For U.S. insurers, they are viewing the Japanese market as an opportunity for additional spread-based income, leveraging their asset origination platforms," he added. "We expect this trend to persist over the near-to-intermediate term."

Athene signs big deal

Athene, the top annuity seller and a subsidiary of Apollo Global Management, Inc., announced a block reinsurance transaction with Sony Life Insurance Co., a top-rated Japanese insurer. As part of this transaction, Athene will reinsure an in-force block of U.S. dollar-denominated whole life insurance policies and will enter into an agreement with leading reinsurer Swiss Re to retrocede all mortality risk associated with the block, Athene said in a news release.

“Japanese insurers are increasingly turning to more tailored solutions and flexible capital to enhance their financial strength and advance policyholders’ goals,” said Katie Daly, executive vice president and global head of M&A, reinsurance, and pensions at Athene. “Our retirement and capital expertise put us in a strong position to address needs unique to the Japan market.”

This transaction marks Athene’s eighth reinsurance transaction across seven cedents, and second block reinsurance transaction with Japanese insurers since entering the market five years ago. This brings the total transaction volume of Athene’s reinsurance transactions with Japanese cedants to approximately $19 billion. Athene’s robust balance sheet, strong capital profile, and alignment with Apollo help to make it a partner of choice to the Japanese retirement market.

“Apollo and Athene’s growing presence in Japan is a direct result of our differentiated model’s ability to bring in capital to support Japanese policyholders,” said Yasuo Kashiwagi, Head of Japan at Apollo. “The combination of balance sheet strength and world-class asset management capabilities fits well with deeper shifts underway in Japan and enables us to provide safe yield solutions to Japanese retirees and savers in an aligned way.”

Brookfield deal

Brookfield Wealth Solutions signed its initial reinsurance agreement with Japanese insurance company Dai-ichi Frontier Life. It is the first Japan-based reinsurance agreement for Brookfield since it established a representative office in Tokyo earlier this year.

Effective this month, the agreement allows Dai-ichi Frontier Life to reinsure liabilities to Brookfield Wealth Solutions’ U.S.-based subsidiary, American National Insurance Co., on a flow basis. Japan is one of the world’s largest insurance markets, with individual life and annuity policies in force totaling over $6 trillion, Brookfield said in a news release.

Sachin Shah, CEO of Brookfield Wealth Solutions, said: “We are pleased to partner with Dai-ichi Frontier Life on our first reinsurance transaction in Japan. Japan is strategically important for Brookfield Wealth Solutions given the size of its life insurance market and favorable macroeconomic trends. Brookfield Wealth Solutions is a strong partner for Japanese insurers, bringing global scale, capital, and operational expertise to help support Japanese policyholders.”

Since opening its office in Tokyo, Brookfield has grown its local team and partnered with hundreds of Japan’s leading institutional and wealth investors. Brookfield Wealth Solutions’ reinsurance agreement with Dai-ichi Frontier Life further builds on Brookfield’s existing presence, relationships, and investments across the country, the release said.

Brookfield Wealth Solutions began its expansion into Japan with the appointment of Tomohide Yokooka as a managing director in its Tokyo office.

“Our approach provides insurance partners in Japan with the ability to enhance the strategic diversification of their asset exposures and access to longer-duration solutions," Yokooka said. "We have an active pipeline of opportunities and look forward to partnering with more Japanese insurers as we grow our business significantly in this market.”

InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected]. Follow him on Twitter @INNJohnH.