Warren Presses Insurance Watchdogs For Answers Amid Walter Probe

US Senator Elizabeth Warren is pressing the National Association of Insurance Commissioners to explain how it’s policing Wall Street firms’ influence over insurers and their bets on private credit, saying a probe of Mark Walter’s businesses raises questions about regulatory gaps. In a letter to NAIC Chief Executive Officer Jeffrey Johnston, the Massachusetts Democrat asked if the group is assessing whether other insurance companies have engaged in the same conduct as Walter’s firms, Delaware Life Insurance Co. and Clear Spring Life and Annuity Co. The US Department of Justice and Securities and Exchange Commission have been probing Walter’s sprawling business empire. Earlier this year, the two insurers disclosed that more than $20 billion of loans on their balance sheets should have been labeled as affiliated but weren’t. While current rules don’t prohibit affiliated investments, they require appropriate disclosures. Warren, the ranking member of the Senate Banking Committee, expressed concerns that the current regulatory framework may not be keeping pace with the evolving risks posed by the industry’s increasing ties with private credit, according to the letter. She also asked the NAIC to detail how potential shortcomings in regulation could be resolved. “It is critical for policymakers to understand whether enhanced federal or state guardrails are needed to address the risks posed by the increase in the size of the insurance market, consolidation in the industry, and the growing entanglement between insurers and the rest of the financial system,” Warren wrote. Walter hasn’t been accused of wrongdoing, and his holding company has said no one has been harmed. “The NAIC has received the letter and looks forward to the opportunity to share how state insurance regulators actively oversee insurer exposure to private credit and other market developments to protect policyholders,” the group said in an emailed statement. Unlike banking, the regulation of the US insurance industry is primarily led by individual state insurance commissioners. The NAIC, which gathers all state regulators, serves as a standard-setting body for the industry. Detractors of that fragmented model say it creates an imbalance between the regulators and insurers. One concern is that firms will choose the most accommodating jurisdiction. Another is that officials may be inclined to bend rules to lure business — and tax revenue — to their states. That doesn’t mean federal authorities are entirely removed from oversight. Earlier this year, US Treasury Secretary Scott Bessent met with the NAIC to discuss the industry’s exposure to private credit. In recent years, alternative asset managers led by Apollo Global Management Inc. have acquired a growing share of the US life insurance industry, as they seek to tap the sector’s stable capital to invest more in the private credit products they originate. As the two industries become more intertwined, critics have voiced concerns that it could create systemic risks. This article was provided by Bloomberg News.