U.S. Insurance Companies Secretly Placed $16 Billion Into Retirement Accounts for Private Loan Operations

Two major US life insurers under federal investigation have restated billions in retirement-backed investments as related-party private loans, raising concerns about transparency and liquidity risk for ordinary savers whose annuities and policies fund these opaque assets. The case highlights structural vulnerabilities in an insurance sector increasingly dominated by private equity ownership.

• Delaware Life Insurance Company restated related-party investments from $1.3 billion to $18 billion after receiving grand jury subpoenas in February.
• Private equity firms owned 137 US insurers at the end of 2024, up from 90 in 2018, collectively holding $704.3 billion in assets.
• Regulators are investigating whether affiliate-introduced loans should have been disclosed as related-party transactions, exposing a gap between asset liquidity and policyholder withdrawal timelines.

• $16.4B Delaware Life’s reclassified private loan investments tied to affiliated companies in 2024
• 137 US insurers owned by private equity firms at year-end 2024, compared to 90 in 2018
• $704.3B Combined assets held by private equity-controlled insurers as of end of 2024

Delaware Life Insurance Company and Clear Spring Life and Annuity Company are under investigation by the US Attorney’s Office in Manhattan and the Securities and Exchange Commission following grand jury subpoenas received in February. The central issue involves $16.4 billion in investments that Delaware Life reclassified as private loans tied to companies with which it shares ownership or management ties. That capital originates from annuities and life insurance policies sold to retail savers who have minimal visibility into the assets backing their retirement promises.

Delaware life restates billions in connected loans following Federal scrutiny

Delaware Life initially reported related-party investments at approximately $1.3 billion but restated that figure to roughly $18 billion following the subpoenas, according to second-quarter filings disclosed in July. The restatement raised a core regulatory question: should loans introduced by an affiliate qualify as related-party transactions requiring enhanced disclosure to investors and regulators?

When an affiliate merely introduces a loan rather than directly originating it, the technical question of whether disclosure obligations apply has created a gray area that prosecutors now believe some insurers exploited. Regulators worry that insurers may have obscured the true scale of interconnected lending to make their balance sheets appear more diversified than they actually are.

State insurance regulators and federal authorities have grown increasingly concerned about how affiliates are used to obscure investment relationships within insurance holding companies. The structure allows PE sponsors to route capital through multiple intermediaries before it reaches the underlying private credit assets, potentially obscuring ultimate beneficial ownership and control from policyholders and rating agencies.

Credit rating agencies have already responded to the uncertainty. A.M. Best, Standard & Poor’s, and Fitch each assigned Delaware Life an A-minus grade while attaching either a negative outlook or a negative watch, signaling concern about the company’s trajectory.

Private Equity ownership of insurers nearly doubled in six years

Private equity’s expansion into insurance reflects a fundamental arbitrage opportunity. Life insurance companies collect premiums today and pay claims over decades, creating predictable cash flows that private equity firms can leverage into higher returns through private credit investments. By shifting allocations from traditional bonds toward private loans, insurers can theoretically improve returns for policyholders while generating fees and carried interest for PE sponsors.

The shift toward private assets has been accelerating across the insurance industry as a whole, not just among PE-owned carriers. Record low interest rates from 2010 to 2021 compressed yields on traditional bond holdings, pushing all insurers to seek higher returns elsewhere. Private credit markets expanded dramatically during this period, offering illiquid but higher-yielding alternatives to public debt securities.

But this strategy creates a structural mismatch between asset and liability timelines. Annuity policyholders can typically withdraw funds within a week, though early withdrawals trigger surrender charges of 7 to 10 percent during the first seven years. The private loans held behind these policies, by contrast, take months to liquidate in secondary markets, amplifying vulnerability if policyholders lose confidence and request withdrawals simultaneously.

Transparency about the composition of insurance company portfolios has historically been limited. Unlike mutual funds, which provide daily valuations and detailed prospectuses, life insurance policies do not require insurers to disclose the specific assets underlying customer contracts. State regulators receive detailed filings, but retail policyholders typically see only aggregate information about asset allocation.

Italy’s Eurovita crisis demonstrates risks of illiquid Insurance portfolios

Italy’s experience with Eurovita, a life insurer owned by private equity firm Cinven, illustrates the systemic risks posed by private credit concentration. When interest rates rose in 2022, bond values fell and Eurovita’s solvency ratio deteriorated from 230 percent to nearly 130 percent. Policyholders began cashing out, and the mismatch between withdrawal demand and illiquid asset sales became acute.

Cinven offered 100 million euros to stabilize the company, but regulators demanded 400 million, forcing Italy to freeze customer withdrawals in February 2023. The freeze remained in place for eight months until October, when five rival insurers absorbed Eurovita’s policies. Though policyholders ultimately lost nothing, the eight-month freeze demonstrated the friction that illiquidity can create once depositor confidence erodes.

The Eurovita episode prompted European regulators to scrutinize PE-owned insurers more closely and raised questions about regulatory preparedness in the United States. Unlike Europe, which has harmonized insurance regulation through Solvency II directives, the US relies on state-by-state oversight that varies considerably in rigor and resources.

Italian regulators later scrutinized how much Eurovita’s private asset allocation had contributed to the crisis, raising questions about whether similar concentrations in US insurers might pose comparable systemic risk during periods of market stress.

Private credit stress signals have already reached levels last seen in 2017, according to market observers tracking credit conditions. The repricing of illiquid credit assets could force insurers to mark positions lower, compressing solvency ratios industry-wide. Savers funding illiquid private loans through their life policies and annuities typically do not know their money backs assets that cannot be quickly converted to cash if the insurance company faces solvency pressure.

The federal investigation will determine whether Delaware Life and Clear Spring Life properly disclosed the nature and scale of their related-party transactions, but the outcome will not resolve the underlying structural question: whether surrender charges and regulatory barriers alone are sufficient to prevent withdrawals from accelerating if US policyholder confidence erodes as it did at Eurovita.

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