Insurers Reclassify $21.6B as Related-Party Investments

Delaware Life Insurance Company and Clear Spring Life and Annuity Company amended their 2025 statutory filings to reclassify a combined $21.6 billion of investments as related-party holdings. Delaware Life moved about $17 billion-roughly 39% of its invested assets-into related-party categories from about $1.4 billion in an earlier filing. Clear Spring added about $4.6 billion.

Delaware Life’s second-quarter filing states the two companies and an affiliate linked to financier Mark Walter received grand jury subpoenas from the U.S. Attorney’s Office for the Southern District of New York in February. The Securities and Exchange Commission opened a parallel inquiry into whether certain private-credit investments should have been labeled related-party. Delaware Life reported it found disclosure errors through an internal review and is cooperating with regulators. Federal authorities have not filed criminal charges against Walter or either insurer.

Related-party classifications affect how investments are reviewed, valued and the capital insurers must hold against them. Life insurers have increased purchases of private credit and other nonpublic loans and securities to match long-term policy liabilities. When holdings are tied to affiliates, filings say reviewers will examine underwriting, pricing, concentration, fee flows and independent valuation because those investments trade infrequently and rely more on ratings and manager-provided information.

Industry and regulator data show private-credit exposure at life insurers has grown. NAIC data for year-end 2024 listed 137 U.S. insurers owned by private-equity firms with $704.3 billion of cash and invested assets; life insurers made up 96% of that group. Structured and asset-backed securities accounted for a larger share of bond holdings at private-equity-owned insurers than across the industry. Federal Reserve research found manager-affiliated entities run a significant share of syndicated and middle-market loans routed through collateralized loan obligations and oversee a large portion of insurers’ general-account assets.

Filings indicate concentration in rating and valuation sources. One ratings firm was the only identified provider for about 16% of Delaware Life’s roughly $32 billion bond portfolio and for at least half of Clear Spring’s roughly $6.3 billion bond book; related parties have paid that firm millions of dollars since 2024. The NAIC has required more disclosure about private ratings, including Private Rating Letter Rationale Reports, and updated filing and capital guidance for nonpublic assets.

Regulatory filings and industry research describe liquidity pressures that can force insurers to sell illiquid assets. Policy surrenders, institutional maturities, derivative collateral calls and advance programs such as Federal Home Loan Bank borrowings can require cash on short notice. Federal Reserve and BIS analyses model scenarios where rising rates or simultaneous claims lead to forced asset sales.

Delaware Life’s filings note an August 17 agreement under which an affiliate, TWG Global, would exchange up to $6.5 billion of affiliate-dependent investments for an equivalent amount of non-affiliated assets, subject to regulatory approval. At June 30, Delaware Life reported $70.5 billion of admitted assets and $4 billion of capital and surplus, with major ratings at A-minus and negative outlooks or watch status. Both companies state their capital and liquidity are strong and that they are cooperating with inquiries.

In an international instance cited in regulator reports, an Italian life insurer’s solvency ratio dropped from about 230% to near 130% by the end of 2022 after bond losses and policy surrenders, prompting special administration and temporary redemption limits in 2023. The recent U.S. filings and regulatory activity have prompted additional scrutiny of related-party arrangements, private-credit holdings and valuation practices across the life-insurance sector.