Apollo CEO Worries About Insurers Heading to Cayman Islands

Capital counting rules for life insurance and annuity issuers are much looser in the Cayman Islands than in the United States or Bermuda, according to Marc Rowan, the CEO of Apollo Global Management.

Outside observers are right to ask questions when life and annuity issuers channel business through companies based in the Cayman Islands, Rowan told securities analysts last week during a call Apollo held to go over third-quarter results.

"The capital regimes in the U.S. and Bermuda, on the one hand, and capital regimes in places like the Caymans and the other jurisdictions, are totally different," Rowan said.

"Anytime you hear people have gone to Caymans, you should just divide the capital by two," Rowan added. "I do not personally believe that is going to end well, and it's not how we run the business. We want to do things on a long-term sustainable basis that provide good rates of return for people while having adequate capital in the business."

Moody's Ratings analysts put out a report in September noted that many life and annuity insurers and reinsurers in the Cayman Islands may be well-run and use capital counting rules comparable to those in the United States but suggesting that operations in the Cayman Islands are often too opaque for it to treat them the same way they would treat operations based in the United States or Bermuda.

Apollo is the parent of Athene and other insurance businesses.

The company as a whole is reporting $1.8 billion in net income for the third quarter on $7.8 billion in revenue, compared with $640 million in net income on $2.6 billion in revenue for the third quarter of 2023.

Athene benefited from "continued strong annuity sales activity in the quarter, reflecting leading market share, growing product offerings, and expanding distribution," according to a company earnings presentation.

Apollo now describes Athene as being part of its retirement business, and it noted that Athene had $20 billion in organic asset growth during the quarter.

"We continue to widen the funnel through distribution expansion," Rowan said during the conference call.

Other companies pay extra fees to Apollo to help the company create "sidecar" funds that invest in the life and annuity business, Rowan said.

"The ability to put more than $6 billion into a sidecar reflects a belief that we will use this responsibly, and we will generate high rates of return on a responsible basis over a long period of time," Rowan said.

Some other companies have to use their own capital to build their business, Rowan said, implying that some competitors may want to use different methods than Apollo's insurance businesses use to count their capital.

George Town, the capital of the Cayman Islands. Credit: Ramunas Bruzas/Shutterstock