A “contagion risk” to the life insurance industry is building in the Cayman Islands, amid a combination of rapid growth and regulation that falls short of international standards.

That is the view of John Golden, global head of financial regulation at private-equity firm Apollo and Athene, the group which operates a life reinsurance company in Bermuda and which is largest fixed annuity seller in the United States.

In conversation with Michael Downing, chief operating officer of Athene Holding, on a video posted on Apollo’s website, the pair said Bermuda’s reinsurance regulation was on the same level as that of the US.

Some reinsurers were being attracted to Cayman by “a lower level of guardrails”, Mr Golden said, creating substantial risk for US policyholders.

“We’re seeing contagion risk right in front of our eyes in the Cayman Islands,” Mr Golden said. “All you have to do is compare the Cayman Islands supervisory regime to the US or Bermuda across the major things that matter — solvency, transparency, governance, risk management, these types of fundamental regulatory policies.

“You’re seeing less in each one of those categories, and sometimes drastically less, depending on the company and the situation.

“That's a problem that is becoming a very, very large problem in the aggregate, one that we are worried might be correlated. So if you start to see failures of companies that are in weaker jurisdictions like Cayman, that could happen in a correlated way.

“And if it does happen in a correlated way, you're talking about very, very large numbers.”

Mr Golden explained that when offshore reinsurers become insolvent, those liabilities revert to insurers in the United States.

“If that Cayman [reinsurance] company doesn’t have enough capital to pay that risk, it declares insolvency,” he said. “Those liabilities don't go away.

“So if you have an annuity to a US company that's reinsured, that policy just comes right back to the US company. Except it comes back without the money to back the policy.”

Mr Golden added that the life insurance and annuities industry was built on trust and had a stewardship role.

“When we start to see people cutting corners, that bears on us directly, not only financially but reputationally,” he added. “There is a line at which you know it becomes arbitrage, and we want to make sure that line does not get crossed.”

He added that companies using Cayman reinsurers were making the same promises backed by less capital, which made those promises less safe.

“You’re seeing companies go down there with transactions that can't get done in Bermuda,” Mr Golden said. “They’re just literally going down there so they can have lower regulatory requirements. That reverts back to the US. That is a trust issue for us. If you have a jurisdiction that chooses to allow for that, how do you trust that jurisdiction?”

He called for the US to adopt a consistent approach to reinsurance regulation and jurisdictional arbitrage.

Cayman is actively seeking qualified jurisdiction status from the US insurance regulation standard-setting body, the National Association of Insurance Commissioners, which would enhance the territory’s regulatory recognition and potentially reduce collateral requirements.

Bermuda also has qualified and reciprocal jurisdiction stats from the NAIC, as well as third-country equivalence with the European Union’s Solvency II framework.

This is not the first time Athene has taken aim at Cayman. In February 2025, the company’s then-CEO, James Belardi, said reserves in Cayman’s life sector were “supported by a fraction of the capital required by the US or Bermuda, which we believe puts the system at risk”.

• To see the Apollo video, clickhere