Investment firms on the cutting edge of finance are turning to one of Wall Street's oldest industries to help them grow: insurance. Private-credit fund managers like Blackstone Inc., Group Inc., and Centerbridge Partners are increasingly forming joint ventures with insurers or purchasing them outright. Call it the marriage of slow and fast money. Insurers have large amounts of cash from annuity payments and insurance premiums, but many have struggled for years to achieve good investment returns in bond portfolios that they manage themselves. Private-equity firms have been developing a financing machine that generates complex private-debt instruments, but at lower yields than their traditional clients require. Insurers are eager to purchase. Large fund managers such as Blackstone, Carlyle, and Sixth Street Partners announced deals with insurers in the last year that increased their collective assets under management by about $80 billion. Insurance ventures were also launched by midsize firms such as Centerbridge, Davidson Kempner Capital Management, and Hildene Capital Management. The transactions are part of a broader shift on Wall Street in which money managers are replacing investment banks as global financial supermarkets. Insurers primarily purchase investment-grade debt, and prior to the 2008 financial crisis, they had a plentiful supply from investment banks in the form of private-placement bonds. Asset managers are now taking over, buying bundles of corporate, consumer, and mortgage loans and packaging them into highly rated debt. "Asset managers such as ourselves have increasingly stepped in to fill the void," said Dushyant Mehra, co-chief investment officer of Hildene, which launched a reinsurance business in September. Private debt is opaque and rapidly growing, which credit rating agencies and regulators have identified as a potential risk. The National Association of Insurance Commissioners, for example, is investigating the risks posed by an increase in insurers' purchases of privately structured securities. Some companies invest in annuity companies, while others enter into asset management agreements with them. Some companies offer reinsurance, or insurance for insurers. Davidson Kempner has just completed its largest insurance transaction to date. The $37 billion asset manager has committed $300 million to a reinsurance venture it formed with Kuvare Holdings, a technology-driven insurer, in December. The new company, Kindley Re, will initially reinsure approximately $4 billion in annuities and similar products sold by Kuvare to individuals and institutions. Kindley will be liable for future annuity payments, freeing up capital for Kuvare. Davidson Kempner will invest some of Kuvare's annuity proceeds and charge a management fee. Kindley profits if investment returns outperform annuity payouts. If not, the reinsurer bears the loss. The trend can be traced back to Apollo Global Management Inc., which assisted in the establishment of annuity insurer Athene Holding Ltd. more than a decade ago. The two companies merged last year, and the Athene subsidiary now manages nearly half of Apollo's $523 billion portfolio. According to Apollo, the potential market for investment-grade private credit could be worth $40 trillion. Typically, such debt yields 5% to 6%, but investors in the firms' private-equity and hedge funds expect returns in excess of 10%. Fixed annuities are purchased by millions of conservative savers. Over the last two decades, these have produced annual returns ranging from 2% to 5.75% for consumers. Many traditional insurers have been shedding annuities in recent years because low interest rates make it difficult to cover obligations while offering competitive yields. Outsourcing annuity operations frees up capital for insurers, potentially increasing their stock prices. "Insurers need other suitable investments that meet their policyholder obligations...so there is an increased need for the capabilities we provide," said Craig Lee, head of insurance and strategic finance at KKR & Co., which purchased life insurer Global Atlantic Financial Group Ltd. in 2021. Some insurance companies have their own investment divisions that are developing private-credit teams. Nonetheless, many people are turning to alternative investment firms that have improved their ability to create private debt with investment-grade credit ratings. The Federal Reserve has raised interest rates dramatically in the last year, but bond yields remain historically low. Private-credit firms have now created higher-yielding debt that is backed by loans to investment-grade companies and equipment leases, real estate, consumer loans, junk-rated corporate loans, and even shares in private-equity funds. Apollo and KKR are now expanding their annuities businesses through Athene and Global Atlantic rather than through acquisitions and reinsurance. As a result, they are in competition with their insurance clients, which has allowed smaller fund managers to form partnerships with insurers. "Insurance companies liked working with Athene and Global Atlantic, but they wanted other reinsurance options," said Matt Kabaker, Centerbridge's head of insurance solutions and co-head of private equity. Massachusetts Mutual Life Insurance Co. approached Centerbridge in 2021 about establishing a reinsurer, and the companies launched Martello Re with a group of co-investors last year. Centerbridge and MassMutual's investment subsidiary, Barings, now manage approximately $16 billion in reinsurance contract assets. Centerbridge manages approximately $35 billion in total assets, roughly half of which are debt investments. "We were able to catapult ourselves to scale in insurance solutions because of this relationship," Mr. Kabaker said.