US state insurance regulators have raised concerns about potential risks tied to complex financial products used by private capital firms Apollo and KKR, according to documents released ahead of upcoming industry meetings. The warning centers on so-called “multi-asset securitisations,” investment structures that package a variety of assets—ranging from credit card debt and mortgages to private equity stakes and direct loans to mid-sized companies—into securities sold to insurers.

These instruments, which have grown rapidly in popularity, are seen by asset managers as a way to generate higher returns than traditional structured debt, while still maintaining strong credit ratings from major rating agencies. Life insurers have increasingly allocated premiums to such investments in an effort to boost returns on annuities marketed to retirees.

However, state regulators have expressed concern about the complexity and limited transparency of these multi-asset products, which they warn may create “circular ownership” and significant interconnectedness among insurers’ balance sheets. This interconnectedness could amplify financial risks, potentially linking exposures across multiple insurance companies and complicating assessments of their financial health.

The documents, issued by the National Association of Insurance Commissioners (NAIC), a standard-setting organization for US state insurance regulators, highlight the challenges these structures pose. While the NAIC itself does not regulate, its meetings and working groups play a key role in shaping industry standards. Regulators argue that despite often being backed by higher-quality collateral than other similarly rated products, these multi-asset securities still carry risks that may not be fully appreciated by policyholders or investors.

Specific products mentioned include Apollo’s Multi-Asset Prime Securities (AMAPS), created for insurer Athene, and KKR’s securitised asset and private equity fund vehicles such as “Thunderbird” and “Lightning,” in which KKR’s affiliated insurer Global Atlantic has invested. Individuals familiar with the NAIC’s working group on these products say their emphasis is on enhancing disclosure or imposing capital requirements to address possible vulnerabilities.

Apollo responded to the concerns by asserting that its multi-asset securities have diverse holdings, are supported by highly rated collateral, employ less leverage than comparable products, and have undergone regulatory review. The firm criticized those raising alarm as “clearly uninformed.” KKR declined to comment on the regulatory scrutiny.

The developments come amid broader scrutiny of how insurers deploy premium funds in private markets, underscoring ongoing debates about risk transparency and financial stability within the insurance sector. The outcomes of the NAIC’s deliberations in the coming months could influence regulatory guidance and market practices for these increasingly prevalent financial instruments.