Senator Elizabeth Warren has intensified her criticism of the National Association of Insurance Commissioners (NAIC) regarding its oversight of private equity firms in the insurance industry. This comes amid ongoing federal investigations into insurers controlled by Mark Walter, co-founder and CEO of Guggenheim Partners. The probes by the Department of Justice and the Securities and Exchange Commission are examining whether Walter's insurers, Delaware Life Insurance Co. and Clear Spring Life and Annuity Co., properly disclosed billions of dollars in private credit investments tied to other ventures within his business empire.
Initially, Delaware Life had reported that approximately 3% of its investments, or about $1.4 billion, involved related parties. However, internal reviews prompted by grand jury subpoenas revealed that the corrected figure was significantly higher, at more than $17 billion, representing at least 39% of total invested assets as of the most recent year-end. This substantial discrepancy led to a restatement of financial reports and prompted S&P Global Ratings to revise Delaware Life's outlook from stable to negative, though its A- financial strength rating was affirmed. The total value of affiliated transactions was even higher at $17 billion more than initially reported, reaching as high as 42% of Delaware Life's assets.
Warren's concerns echo a broader regulatory push to scrutinize the increasing allocation of life insurers' balance sheets to private credit, especially when arranged by or connected to an insurer's ownership group. Regulators have been trying to address disclosure gaps and potential risks, such as illiquid assets that could be tied to an insurer's surplus. The investigations into Walter's companies highlight the challenges in transparently disclosing ties between an insurer's private credit book and its ownership structure, and the accuracy of stated related-party exposures versus actual figures.
