Odd Lots · Friday, July 31, 2026
Private equity firms are increasingly acquiring or investing in life insurance companies to access their long-dated liabilities and 'permanent capital.' This allows them to deploy private credit strategies, theoretically capturing illiquidity premiums and creating synergies across buyout, private credit, and insurance entities.
“So you can think of this as being so McKinsey's this a flywheel. So imagine you have like a private equity firm with three subsidiaries. You have a traditional like buy out subsidiary that buys up companies and uses leverage to do so, you have a private credit fund which issues these high risk, high yield loans, and then you also have a life insurance entity. There are theoretically all these different synergies between all of these actors.”
“So insurers famously have long dated liabilities, right, they have patient capital. They can take in a liquid asset and sit on it for ages and ages and capture that illiquidity premium, that higher yield, so they would seem to be a natural place for private credit to actually end up.”
“You have this widely dispersed retail base of policy holders, a large fraction of whom are totally insured, and so even you can do whatever you want and like in theory, they shouldn't care because no matter what, they have full coverage. Obviously that's not true for everyone, but it's just the level of kind of examination that you're going to get from your creditors is so much lower if you are running the private credit through the life insured balance sheet rather than through kind of a standard private credit fund.”