EU insurance regulator demands long-term view from private equity buyers

By Francesco Canepa

FRANKFURT, July 22 (Reuters) - Private equity firms seeking to buy European insurers must show they can support policyholders for the long term rather than pursuing a quick profit, Europe's insurance watchdog said.

Petra Hielkema, chair of the European Insurance and Occupational Pensions Authority (EIOPA), said private equity (PE) ownership could bring capital, expertise and competition.

"If you say you're long term, you should be long term and long term is not five years," she told Reuters.

Alternative asset managers have been expanding into insurance, attracted by predictable income streams and the large pools of assets insurers manage on behalf of customers.

Such deals have caught the attention of regulators and investors, heightened by some recent stress in the market for private, or unlisted, investments.

Supervisors want to ensure new owners do not channel policyholder money into riskier affiliated investments or leave insurers financially weaker when they exit, Hielkema said.

"The question you would then need to ask is: what is your post-acquisition strategy?" she said, adding: "You need a convincing answer to that, that also satisfies the need for prudence, consumer protection, and stability".

EIOPA, which coordinates the European Union's 27 national insurance watchdogs, is due to finalise a "supervisory statement" to help them assess takeovers by private equity firms, which typically aim to sell after around five years.

Prospective buyers will be asked how long they expect to stay invested as insurers have obligations to customers stretching across decades.

Regulators will also examine ownership structures, transactions within the group and investment strategies that could expose policyholders to new risks.

They are also paying close attention to insurers' growing exposure to private credit and increasingly complex reinsurance arrangements that transfer risks to affiliated entities, sometimes in offshore jurisdictions such as the Cayman Islands.

In Britain, regulators plan to tighten the capital treatment of so-called funded reinsurance.

'TOO MUCH' IN SOME COUNTRIES

Although private equity ownership remains relatively low in the EU, the average masks higher concentrations in some countries. Around 20% of Greece's insurance market is linked to PE, Portugal and Luxembourg about 16% and the Netherlands 13%.

Private equity investors took control of 37 EU insurers between 2014 and 2024 and exited 11, leaving 26 PE-owned insurance groups with about €260 billion ($303 billion) of assets under management, or 2.4% of the market, EIOPA said.

The number of PE-owned U.S. insurers rose from 90 in 2018 to 137 in 2024, with $704 billion in cash and invested assets, or 7.8% of the industry total, U.S. supervisor NAIC said.    

"In some individual cases there is a point where the supervisor will say: this is too much," said Hielkema, adding that regulators could act when an insurer became overly dependent on one investor or on transactions with affiliated companies, creating concentration risks.

Hielkema said some investors may overestimate how easily business models that proved successful in the United States and Britain can be transplanted into continental Europe, where insurance products, customer behaviour and regulation differ.

She highlighted Eurovita, an Italian insurer owned by private equity group Cinven, which had to be rescued in 2023. 

(Reporting by Francesco Canepa; Editing by Tommy Reggiori Wilkes and Alexander Smith)