Key Takeaways
- • UNITE HERE, representing 300,000 hospitality workers, issued a formal warning to hundreds of defined benefit pension plan administrators and actuaries regarding liquidity and asset quality risks in pension risk transfer (PRT) deals with private equity-backed insurers.
- • American National Insurance Co. (Galveston, Texas), owned by Brookfield Reinsurance Ltd.—an affiliate of Canadian alternative asset manager Brookfield Corp.—was specifically identified as employing a strategy of replacing safe, liquid annuity assets with complex or illiquid private loans and debt instruments.
- • The union argues that pension obligations are being used as funding sources for private equity managers pursuing illiquidity premiums, with particular concern about performance of private debt assets during extended downturns or permanent credit impairments when liquidity becomes critical.
- • American National Insurance disputes the allegations, stating it maintains "high levels of liquidity" and operates under strict insurance regulation, according to Senior Vice President Scott Campbell.
- • The union called for updated Department of Labor guidance, noting that absent such direction, plan fiduciaries must independently assess risks in evolving PRT structures.
Summary
UNITE HERE, a U.S.-Canadian labor union with 300,000 members, has formally warned hundreds of defined benefit pension plan administrators and actuaries of material risks associated with pension risk transfer transactions involving private equity-backed insurers. The warning, distributed via letter to plan fiduciaries and actuaries, raises concerns about the structural integrity and liquidity profile of an increasingly common market approach to de-risking defined benefit obligations.
The union specifically flagged American National Insurance Co., a Galveston, Texas-based insurer owned by Brookfield Reinsurance Ltd.—itself an affiliate of Toronto-based alternative asset manager Brookfield Corp. According to the union's analysis, Brookfield's investment strategy involves acquiring blocks of annuities and group annuities, then systematically replacing a portion of the safest, most liquid assets with complex or illiquid investments such as private loans. The union contends that while private-debt assets may perform adequately during short-term market downturns, their behavior during extended credit cycles or permanent credit impairments remains materially unclear and poses unquantified risk to pension beneficiaries.
In its formal statement, UNITE HERE argued that pension obligations should not serve as "cheap funding sources for private equity asset managers chasing the illiquidity premium or offloading illiquid assets their own affiliates have originated." The union emphasized that plan fiduciaries currently lack updated regulatory guidance from the Department of Labor on these structures, forcing them to independently navigate emerging risks in the PRT market without explicit DOL framework or guardrails.
American National Insurance disputed the union's characterization. Senior Vice President Scott Campbell issued a statement asserting that, like all insurance companies, American National maintains high regulatory oversight and "high levels of liquidity," implicitly rejecting claims of structural illiquidity or asset quality degradation. The statement provided limited additional detail on the specific composition of its private loan portfolio or stress-testing protocols during prolonged credit stress scenarios.
The warning reflects broader institutional concern about private equity involvement in pension asset management and de-risking strategies. The absence of updated Department of Labor guidance on private equity use within PRT structures leaves plan sponsors and fiduciaries with incomplete regulatory clarity, forcing them to conduct independent risk assessments while managing fiduciary liability under ERISA.
The union specifically flagged American National Insurance Co., a Galveston, Texas-based insurer owned by Brookfield Reinsurance Ltd.—itself an affiliate of Toronto-based alternative asset manager Brookfield Corp. According to the union's analysis, Brookfield's investment strategy involves acquiring blocks of annuities and group annuities, then systematically replacing a portion of the safest, most liquid assets with complex or illiquid investments such as private loans. The union contends that while private-debt assets may perform adequately during short-term market downturns, their behavior during extended credit cycles or permanent credit impairments remains materially unclear and poses unquantified risk to pension beneficiaries.
In its formal statement, UNITE HERE argued that pension obligations should not serve as "cheap funding sources for private equity asset managers chasing the illiquidity premium or offloading illiquid assets their own affiliates have originated." The union emphasized that plan fiduciaries currently lack updated regulatory guidance from the Department of Labor on these structures, forcing them to independently navigate emerging risks in the PRT market without explicit DOL framework or guardrails.
American National Insurance disputed the union's characterization. Senior Vice President Scott Campbell issued a statement asserting that, like all insurance companies, American National maintains high regulatory oversight and "high levels of liquidity," implicitly rejecting claims of structural illiquidity or asset quality degradation. The statement provided limited additional detail on the specific composition of its private loan portfolio or stress-testing protocols during prolonged credit stress scenarios.
The warning reflects broader institutional concern about private equity involvement in pension asset management and de-risking strategies. The absence of updated Department of Labor guidance on private equity use within PRT structures leaves plan sponsors and fiduciaries with incomplete regulatory clarity, forcing them to conduct independent risk assessments while managing fiduciary liability under ERISA.
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