Atlantic Coast Life faces regulatory challenge over private credit exposure

US Regulators are seeking greater control over Atlantic Coast Life Insurance and its reinsurer Southern Atlantic Re, alleging that the insurer’s PE ownership exposed policyholder funds to excessive amounts of illiquid private credit and other alternative investments, according to a report by Forbes.

The South Carolina insurance director petitioned a state court in September to take control of the two companies, arguing that investment practices had put the ability to meet obligations to thousands of policyholders at risk. Florida subsequently suspended Atlantic Coast Life’s certificate of authority on 1 October, although it ordered the insurer to continue servicing existing policies.

The allegations have not been proven in court. Atlantic Coast Life and its parent, A-CAP, dispute the regulator’s claims and maintain that policyholder claims continue to be paid.

The case highlights growing concerns around the convergence of private equity, private credit and the insurance industry, as asset managers increasingly seek to deploy private-market strategies within businesses responsible for managing long-term retirement savings.

Atlantic Coast Life is owned by A-CAP, or Advantage Capital Holdings, which is led by chairman and chief executive Kenneth King. The South Carolina regulator characterises the parent as a private equity firm, while A-CAP describes itself as an insurance and financial services company with more than $16bn in assets under management.

Oaktree Capital Management has agreed to acquire a controlling interest in Atlantic Coast Life, although the transaction has yet to close and remains subject to restructuring and regulatory approvals.

According to the South Carolina regulator, Atlantic Coast Life’s business changed significantly after A-CAP acquired the insurer in 2015. Premium and annuity income rose sharply, while the company entered into investment management arrangements with A-CAP and affiliated entities.

The regulator alleges that the insurer subsequently exceeded agreed limits on private-placement investments and that some assets reported as investment-grade bonds should instead have been classified as unrated collateral loans.

The insurer also has exposure to 777 Partners, the investment firm founded by Josh Wander that has faced separate allegations of fraud. Leadenhall Capital alleged in litigation that A-CAP was the controlling force behind 777 and that the firm had borrowed against assets that did not exist. A-CAP rejects those claims, saying it was a lender to 777 with senior rights over collateral rather than an owner or controller.

Wander was indicted in 2025 on wire-fraud and securities-fraud charges relating to an alleged scheme involving more than $500m. Neither King nor A-CAP was named in that indictment. Separately, a federal judge has allowed Leadenhall’s civil fraud and racketeering claims against A-CAP to proceed, although that decision does not represent a finding of wrongdoing.

A-CAP has characterised the regulatory action as excessive and has challenged the South Carolina insurance director in court. It subsequently withdrew that lawsuit without prejudice and agreed to mediation.

Oaktree’s proposed acquisition could provide a potential route towards stabilising Atlantic Coast, although the transaction does not in itself resolve the regulatory proceedings. Oaktree’s planned capital support is primarily directed towards Sentinel, rather than Atlantic Coast.