U.S. Senator Elizabeth Warren urged the National Association of Insurance Commissioners to explain how it regulates Wall Street firms’ influence over insurance companies and their bets on private credit, saying an investigation into Mark Walter’s business raises questions about regulatory gaps.
in a letter Massachusetts Democrats asked NAIC CEO Jeffrey Johnston whether the organization is evaluating whether other insurance companies have engaged in the same behavior as Walter’s company, Delaware Life Insurance Company and Clear Spring Life and Annuity Co.
The U.S. Department of Justice and Securities and Exchange Commission have been investigating Walter’s vast business empire. Earlier this year, two insurance companies disclosed that more than $20 billion in loans on their balance sheets should have been labeled as related loans, but were not. While current rules do not prohibit affiliated investments, they do require appropriate disclosures.
Warren, ranking member of the Senate Banking Committee, expressed concern that the current regulatory framework may not be able to keep up with the evolving risks posed by the industry’s growing ties to private credit, the letter said. She also asked the NAIC to detail how it would address potential shortcomings in oversight.
“Policymakers must understand whether increased federal or state regulation is needed to address the risks posed by the expansion of the insurance market, industry consolidation, and the deepening entanglement between insurance companies and the rest of the financial system,” Warren wrote.
Walter has not been accused of wrongdoing, and his holding company said no one was harmed.
“NAIC has received this letter and looks forward to the opportunity to share how state insurance regulators are proactively monitoring insurers’ exposure to private credit and other market developments to protect policyholders,” the group said in an emailed statement.
Unlike the banking industry, regulation of the U.S. insurance industry is dominated by state insurance commissioners. The NAIC brings together all state regulatory agencies and serves as the standard-setting body for the industry.
Critics of this decentralized model say it creates an imbalance between regulators and insurers. One concern is that companies will choose the most lenient jurisdiction. Another reason is that officials may be inclined to change rules to attract business and tax revenue to their states.
This does not mean that federal authorities are completely free from oversight. Earlier this year, U.S. Treasury Secretary Scott Bessent met with the NAIC to discuss the industry’s exposure to private credit.
Alternative asset managers, led by Apollo Global Management Inc., have gained a growing share of the U.S. life insurance industry in recent years as they seek to tap into the industry’s stable capital and invest more in the private credit products they develop. As the two industries become more intertwined, critics worry this could create systemic risks.
photo: Commuters leave the Wall Street subway station near the New York Stock Exchange. Photographer: Michael Nagel/Bloomberg
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