{"text":[[{"start":0,"text":"US regulators are sounding an alarm over risks of “circular ownership” and opaque holdings in fast-growing financial structures used by private capital groups including Apollo and KKR."}],[{"start":22.98,"text":"The warning, set out in new documents from the standard-setting body for US state insurance regulators, cuts to a growing concern that the investments filling insurance balance sheets could harbour greater risks than policyholders or investors perceive, as the industry invests vast proceeds from premiums in private markets."}],[{"start":41.2,"text":"Stepped-up disclosure or capital requirements could blunt the growth of so-called multi-asset securitisations, investments that often slice and dice stakes in a handful of funds. They can own anything from credit card debt and mortgages to private equity fund stakes and direct loans to middle-market companies."}],[{"start":59.32,"text":"Asset managers have pitched this fast-growing corner of financial markets as more lucrative than traditional structured debt, while still winning pristine ratings from the big credit agencies."}],[{"start":70.28,"text":"Life insurers, which are hungry for long-dated investments to meet their decades-long promises to policyholders, have been studying and investing in these new securitised debt deals as they look to bolster the returns they market on annuities they sell to retirees."}],[{"start":85.08,"text":"The complexity and lack of transparency in the products, as well as their potential to create “interconnectedness” between the balance sheets of separate insurers, have raised concerns for state regulators, according to documents released ahead of the summer meetings of the National Association of Insurance Commissioners, a standard-setting body."}],[{"start":102.84,"text":"While the NAIC is not a regulator, state insurance regulators attend its meetings and organise working groups to co-ordinate industry standards, including on the capital companies must have on hand to meet their obligations to policyholders."}],[{"start":117.04,"text":"Although multi-asset structures are sometimes backed by collateral of higher quality than other financial products with similar credit ratings, regulators were concerned the assets had “greater potential to create interconnectedness between and within insurance company portfolios”, the NAIC memo said."}],[{"start":135.04,"text":"People familiar with an NAIC working group leading the work said its focus on these types of investments included Apollo Multi-Asset Prime Securities, a structured credit product Apollo built for its insurer Athene, as well as KKR securitised asset and private equity funds such as “Thunderbird” and “Lightning”, in which KKR’s insurer Global Atlantic has invested."}],[{"start":157.84,"text":"In a statement, an Apollo spokesperson said its multi-asset securities have diverse holdings and highly rated collateral with less leverage and have been reviewed by regulators. “Those who have done the work recognise the transparency and benefits AMAPS brings to the market,” the statement said. “Those who view AMAPS as adding risk are, unfortunately, clearly uninformed.”"}],[{"start":178.32,"text":"KKR declined to comment."}],[{"start":180.74,"text":"The NAIC working group signalled it was preparing to request greater disclosure of the assets underlying these and similar structures, the people said."}],[{"start":189.08,"text":"The documents also showed the group was keen to investigate potential circular ownership risks, in which insurers could inadvertently hold more concentrated exposures than they realised to certain assets, due to the complex interlinkages of these products."}],[{"start":202.8,"text":"For example, it noted, “a multi-collateral structure could invest in an asset that in turn holds an investment in the multi-collateral structure, creating circular ownership”. If the asset class continues to grow, it added, there was a rising risk that “independent vehicles invest in the same assets, or potentially in each other”."}],[{"start":221.74,"text":"In addition to concerns over transparency and interconnectedness, they also raised concerns not specific to the Apollo and KKR structures, the people added."}],[{"start":230.96,"text":"Regulators said that they had identified significant problems in insurers’ multi-asset investment vehicles related to whether the products can offer the returns they promise over the long term."}],[{"start":240.88,"text":"Regulators said some insurers have already bought investment products that create maturity mismatches, in which structures promise to pay returns over decades, but rely on underlying assets that mature years or decades beforehand. That has raised questions about whether companies will be able to source investments with similar levels of profitability in the future."}],[{"start":264.92,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1785479390_4245.mp3"}