Looser regulations for life reinsurers in the Cayman Islands than in America represent “a gaping hole in the US regulatory system”, according to the top executive of the company that owns Athene.

Marc Rowan, chief executive of Apollo Global Management, added that the indications from US regulators were that this opportunity for regulatory arbitrage — which threatened to erode public trust in the industry — was “about to be closed”.

Speaking at the Bank of America European Financials CEO conference in London, Mr Rowan said some life reinsurers were attracted to Cayman, “where you don't have to put up the same amount of capital and can take a little more risk.

“That is a gaping hole in the US regulatory system to the extent certain providers are forced to hold certain amounts of capital and you can move offshore to jurisdictions that are non-reciprocal.”

Mr Rowan said he believed the National Association of Insurance Commissioners, the US standard-setting body, was aware of the issue.

“The recent NAIC pronouncements tell me that this is about to be closed — a very significant movement by the NAIC to address this regulatory arbitrage and the race to the bottom.

“And by the way, it is not just with Cayman. You have a few US states that, in order to make their local companies more competitive, have kind of done an onshore Cayman and I believe you will have that too.”

The NAIC is working towards implementing tighter capital standards for life reinsurers based in jurisdictions deemed not to have regulatory equivalence with the US. Bermuda has qualified jurisdiction status from the US, while Cayman does not, but is seeking it.

The tighter rules are intended to take effect by the end of 2027.

Bermuda dominates offshore life reinsurance — total assets across its long-term insurance sector exceed $1.5 trillion.

Cayman is growing fast. By the end of 2025, the Caribbean British Overseas Territory’s life and annuities sector held about $101 billion in total assets, up from $23 billion in 2020.

The industry in both jurisdictions is fuelled by demand from life insurers to offload some of their long-term risks to reinsurers as they meet surging demand for annuities from an ageing global population.

Athene is the largest seller of annuities in the US. Athene Life Re, its reinsurance entity, is based in Bermuda, where the industry is booming.

Mr Rowan said he expected the industry to keep growing until 2050, meeting the needs of retirees.

He also spoke about Athora, a spin-off from Athene, which plans to move its corporate and legal headquarters from Bermuda to London by the end of 2027.

The move was announced after Athora acquired Pension Insurance Corporation, a British company, for $7.6 billion in March.

Mr Rowan said the UK regulatory preference was to do the pension risk transfer business onshore rather than relying on reinsurance to spread the risk.

Whether that was possible depended on sufficient uptake of private credit, of which the life insurance industry is a major supplier.

“If there is good business to do at reasonable spread, the business can be done onshore,” Mr Rowan said.

“At the end of the day, these businesses are totally also origination dependent. If you do not have excess spread of investment grade product, you cannot do appropriate business.”