Key Takeaways
- • UBS Chair Colm Kelleher warned on November 4, 2025, at a Hong Kong Monetary Authority conference that private credit rating agency arbitrage poses a "looming systemic risk" to the insurance industry, citing inadequate regulatory oversight and proliferation of smaller rating agencies.
- • Apollo CEO Marc Rowan directly disputed Kelleher's assessment on the company's Q4 earnings call, stating "Colm is just wrong" and countering that 70% of Apollo's captive insurer Athene's assets carry dual ratings from the "Big Three" agencies (S&P, Moody's, Fitch).
- • The dispute reflects growing tension between traditional banking institutions and private credit operators over risk management practices in insurance-linked private credit investments, where insurers have increasingly deployed capital into higher-yielding alternative assets.
- • Rowan acknowledged systemic risk concerns deserve scrutiny but redirected criticism away from rating agencies themselves, arguing smaller specialized firms like Kroll and DBRS possess superior expertise in structured products rating—directly undermining Kelleher's core concern about "rating agency arbitrage."
- • The conflict highlights a regulatory blind spot: insurers' growing appetite for private credit assets lacks the effective oversight framework traditional bank-issued debt enjoys, creating potential financial stability implications if asset quality deteriorates.
Summary
A high-profile clash emerged between UBS and Apollo over private credit rating practices within the insurance sector, escalating long-standing tensions between established financial institutions and private capital operators. On November 4, 2025, UBS Chair Colm Kelleher articulated concerns about systemic risk at a Hong Kong Monetary Authority conference, specifically targeting what he characterized as uncontrolled rating agency arbitrage in the insurance industry. Kelleher drew a direct parallel to pre-2008 dynamics, stating: "In 2007, subprime was all about rating agency arbitrage." He emphasized that the "lack of effective regulation" in insurance combined with "massive growth in small rating agencies ticking the box for compliance" creates dangerous precedent.
The trigger for this debate is structural: institutional insurers, historically dependent on investment-grade fixed income for steady returns, have increasingly deployed capital into private credit assets offered by private equity sponsors and their affiliated insurers. Major private equity players—including Apollo through its captive insurer Athene—have either acquired insurance platforms or partnered with established carriers to channel insurance reserves into private credit investments. This shift has created demand for favorable credit ratings, and Kelleher warned that smaller, less stringent rating agencies have filled the gap left by the Big Three (S&P, Moody's, Fitch).
Apollo's response came swiftly and aggressively. On the company's Q4 earnings call, CEO Marc Rowan rejected Kelleher's characterization entirely, stating plainly: "Colm is just wrong." Rowan leveraged Apollo's own captive insurance subsidiary as evidence, noting that 70% of Athene's assets carry dual ratings from the largest established rating houses. However, Rowan's defense contained a notable concession: he acknowledged that smaller agencies like Kroll and DBRS, which Apollo also employs, "have most of the expertise right now in structured products." This admission partially validated Kelleher's underlying concern about proliferation of smaller raters, even as Rowan disputed the systemic risk characterization.
Rowan was more precise than dismissive, granting that Kelleher was "not wrong to think about and talk about systemic risk" but arguing the issue lies elsewhere than with rating agencies. This framing sidesteps rather than resolves the core regulatory question: whether insurers' increasingly aggressive allocation to private credit, combined with fragmented and potentially inconsistent rating standards across agencies, creates financial stability vulnerabilities in an underdeveloped regulatory environment.
The trigger for this debate is structural: institutional insurers, historically dependent on investment-grade fixed income for steady returns, have increasingly deployed capital into private credit assets offered by private equity sponsors and their affiliated insurers. Major private equity players—including Apollo through its captive insurer Athene—have either acquired insurance platforms or partnered with established carriers to channel insurance reserves into private credit investments. This shift has created demand for favorable credit ratings, and Kelleher warned that smaller, less stringent rating agencies have filled the gap left by the Big Three (S&P, Moody's, Fitch).
Apollo's response came swiftly and aggressively. On the company's Q4 earnings call, CEO Marc Rowan rejected Kelleher's characterization entirely, stating plainly: "Colm is just wrong." Rowan leveraged Apollo's own captive insurance subsidiary as evidence, noting that 70% of Athene's assets carry dual ratings from the largest established rating houses. However, Rowan's defense contained a notable concession: he acknowledged that smaller agencies like Kroll and DBRS, which Apollo also employs, "have most of the expertise right now in structured products." This admission partially validated Kelleher's underlying concern about proliferation of smaller raters, even as Rowan disputed the systemic risk characterization.
Rowan was more precise than dismissive, granting that Kelleher was "not wrong to think about and talk about systemic risk" but arguing the issue lies elsewhere than with rating agencies. This framing sidesteps rather than resolves the core regulatory question: whether insurers' increasingly aggressive allocation to private credit, combined with fragmented and potentially inconsistent rating standards across agencies, creates financial stability vulnerabilities in an underdeveloped regulatory environment.
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