Apollo Global Management Inc. warns that the growing move by some U.S. insurers to the Cayman Islands carries echoes of Silicon Valley Bank’s sudden collapse—an implosion that quickly spiraled into a regional banking crisis.
Apollo called the British overseas territory a “home for regulatory arbitrage” in a presentation Thursday, warning that Cayman’s insurance market falls short on risk management and lacks sufficient assets to back its liabilities.
Apollo pointed to Silicon Valley Bank’s 2023 implosion as a cautionary tale, saying it was triggered by strikingly similar forces.
Cayman risks becoming the insurance industry’s “SVB moment,” the presentation cautioned, pointing out that U.S. insurers’ exposure to the territory has surged to more than twice its level just two years ago—and keeps growing.
In an earlier statement, the Cayman Islands Monetary Authority said it is a founding member of the International Association of Insurance Supervisors, has information-sharing agreements with U.S. states, works closely with overseas regulators during firm inspections and examinations, and regularly reviews and updates its regulatory framework.
“There is no basis for concern,” CIMA said in the statement. “While CIMA’s regulatory framework may be different to other jurisdictions, it fully aligns with international standards and aims to achieve the same supervisory outcomes as promulgated by IAIS.”
A spokesperson for CIMA didn't immediately respond to a request for comment.
Apollo CEO Marc Rowan sounded the alarm earlier this week, warning that the island could be at the center of a new wave of bankruptcies.
“We’ve now seen three bankruptcies in Cayman — we will see more,” Rowan said at the Goldman Sachs Financial Services Conference Wednesday. “I do not believe that Cayman will be a viable US jurisdiction over 24 months.”
Alarm bells have been ringing in recent months as executives, regulators, and experts flag growing risks at U.S. life insurers amid private equity’s expanding footprint. An October study by the Bank for International Settlements traced part of the industry’s exposure to its heavier reliance on offshore reinsurance, where capital standards are far more permissive than in the U.S.
Among the jurisdictions flagged by the economists were Cayman and Bermuda—both home to reinsurance entities owned by Athene, Apollo’s life insurance arm.
“We operate in a heavily regulated industry and maintain the same policyholder benefit reserves for our Bermuda reinsurance subsidiaries as we do for our US insurance subsidiaries, where $1 billion of reserves in the US is equal to $1 billion of reserves in Bermuda,” the firm said in a previous statement.
During its Thursday presentation, Apollo emphasized that insurers including Prudential Financial Inc. and MetLife Inc. are active in Bermuda. It also highlighted Athene’s robust A+ rating from S&P Global Ratings and its $35 billion in regulatory capital.
Photograph: The waterfront in Grand Cayman. Photo credit: David Rogers/Getty Images
