https://www.insurerbrain.com/w/index.php?action=history&feed=atom&title=Definition%3ACarried_interest 2026-06-14T00:38:12Z Revision history for this page on the wiki MediaWiki 1.43.8 https://www.insurerbrain.com/w/index.php?title=Definition:Carried_interest&diff=10507&oldid=prev 2026-03-11T16:41:12Z

<p>Bot: Creating new article from JSON</p> <p><b>New page</b></p><div>💼 &#039;&#039;&#039;Carried interest&#039;&#039;&#039; is the share of investment profits — typically 20 percent — that a fund manager earns as performance-based compensation, and in the insurance world it surfaces most prominently when [[Definition:Insurance company | insurers]] and [[Definition:Reinsurance | reinsurers]] invest as limited partners in [[Definition:Private equity | private equity]], [[Definition:Insurance-linked securities (ILS) | insurance-linked securities (ILS)]] funds, or other alternative asset vehicles. Because insurers hold vast [[Definition:Investment portfolio | investment portfolios]] to back policyholder obligations, the carried interest charged by fund managers directly affects [[Definition:Investment income | investment returns]] and, by extension, the insurer&#039;s overall profitability and [[Definition:Capital and surplus | surplus]] growth.<br /> <br /> ⚙️ When an [[Definition:Insurance company | insurance company]] commits capital to an alternative investment fund, the fund&#039;s general partner typically collects a management fee plus carried interest once returns exceed a predetermined hurdle rate. For the insurer, this fee structure must be evaluated against [[Definition:Statutory accounting principles (SAP) | statutory accounting]] rules that govern how investment expenses and unrealized gains are reported. Regulators scrutinize the concentration of insurer assets in carried-interest-bearing vehicles to ensure that fee drag does not erode the [[Definition:Risk-based capital (RBC) | risk-based capital]] position. Additionally, some [[Definition:Captive insurance | captive]] structures and [[Definition:Sidecar | sidecars]] organized as limited partnerships use carried interest to compensate the underwriting manager, blending traditional fund economics with insurance risk transfer.<br /> <br /> 📈 Understanding carried interest matters for insurance executives and board members because it shapes the true net yield on a growing portion of industry assets. As low interest rates and compressed [[Definition:Combined ratio | combined ratios]] have pushed carriers toward alternative investments in search of higher returns, carried interest has become a meaningful line item in investment expense budgets. It also creates alignment incentives: when a catastrophe-bond fund manager&#039;s compensation depends on delivering returns above a hurdle, the manager is motivated to structure [[Definition:Insurance-linked securities (ILS) | ILS]] transactions carefully. However, the complexity and illiquidity associated with carried-interest vehicles demand rigorous due diligence, transparent reporting, and board-level oversight — areas where insurance-specific governance standards continue to evolve.<br /> <br /> &#039;&#039;&#039;Related concepts:&#039;&#039;&#039;<br /> {{Div col|colwidth=20em}}<br /> * [[Definition:Private equity]]<br /> * [[Definition:Insurance-linked securities (ILS)]]<br /> * [[Definition:Investment income]]<br /> * [[Definition:Sidecar]]<br /> * [[Definition:Risk-based capital (RBC)]]<br /> * [[Definition:Alternative risk transfer (ART)]]<br /> {{Div col end}}</div>

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