Delaware Life Insurance Company's 2025 balance sheet took on a startling new shape when the insurer corrected its annual filing: roughly $17 billion of investments were classified as related-party holdings, about 39% of invested assets, versus roughly $1.4 billion and 3% in the earlier version.
Clear Spring Life and Annuity Company made a separate correction of about $4.6 billion, taking the two revisions above $20 billion across companies connected to financier Mark Walter.
Transactions with related entities are permitted under state insurance oversight, and the corrected labels say nothing conclusive about loan quality. They expose how a model built around private assets, affiliated managers and patient insurance money can become hard to read, even for people paid to read statutory accounts.
This now has a federal audience, as Delaware Life's second-quarter filing says the company and Clear Spring received grand jury subpoenas from the US Attorney's Office for the Southern District of New York in February.
The SEC opened a parallel inquiry into whether certain private-credit investments introduced by an affiliate should have carried related-party labels, and the filing says Delaware Life is cooperating and found disclosure errors through an internal review. Federal authorities haven't charged Walter or either insurer with a crime.
This is a much bigger issue than just these two insurers, because the American private-credit boom has been moving through life insurance companies for years. Their liabilities can last for decades, giving them a defensible reason to hold loans that don't trade every day, while policyholders, derivatives counterparties, and wholesale funders can still demand cash essentially any time they want.
How insurance companies became private credit's permanent capital
Life insurers collect premiums today and invest them against benefits that may come due many years from now, which makes long-dated private loans a pretty good fit. Private credit means loans negotiated outside public bond markets, with custom covenants, limited trading, and yields that compensate for harder valuation. The National Association of Insurance Commissioners treats their duration as a useful liability match and their illiquidity as an oversight difficulty.
Buying or partnering with an insurer gives an asset manager a recurring pool of premium income and a home for private loans, asset-backed securities, and structured products. Policyholders receive annuities and life policies, the insurer receives yield, and the manager earns fees.
The scale is now large enough to compare to banks in any map of credit creation. NAIC data for year-end 2024 counted 137 US insurers owned by private-equity firms, up from 90 in 2018, with $704.3 billion of cash and invested assets, equal to 7.8% of the roughly $9 trillion held by US insurers. Life insurance companies accounted for 96% of that private-equity-owned group, and the count reached 139 by June 2025.
Structured and asset-backed securities represented 31% of bonds at private-equity-owned insurers, versus 13% for all insurers, for a total near $133 billion. Federal Reserve research found that life-insurer-affiliated managers held about 35% of broadly syndicated loans and 40% of middle-market loans routed through collateralized loan obligations, or CLOs, and oversaw 72% of industry general-account assets.
Delaware Life's correction gives affiliation labels much more legal and informational weight, since a $17 billion exposure invites a deeper look at underwriting, pricing, fee flows, concentration, and independent valuation than the earlier $1.4 billion figure.
Public bonds trade daily, while a bespoke private loan may go months between transactions. Ratings, models, and manager-supplied information therefore carry an unusual amount of authority over reported solvency and the capital held against each asset.
Bloomberg reported that Egan-Jones Ratings Company was the sole known rating provider for about 16% of Delaware Life's roughly $32 billion bond portfolio and at least half of Clear Spring's roughly $6.3 billion bond book, with related companies paying the firm around $8 million since 2024.
This is an extremely concentrated dependence on judgments that directly feed regulatory capital treatment, while loan quality requires its own assessment.
NAIC found that 96% of bonds held by private-equity-owned insurers carried NAIC 1 or 2 designations, the two highest categories and a share close to the industry norm. Most holdings are recorded as investment grade, which helps explain the sector's sturdy headline solvency ratios.
An investment-grade label and ready cash are two different things. A senior private loan may repay in full over seven years and still fetch an ugly price in a Friday sale. Schedule BA assets, a statutory bucket for harder-to-classify investments, were affiliated at a 67% rate for private-equity-owned insurers versus 48% across the industry, while collateral loans reached $19.2 billion.
The International Monetary Fund has put private credit at about one-third of North American insurers' investments, mostly in investment-grade form. Expected repayment and immediate sale value can diverge sharply, leaving a life insurer solvent on a hold-to-maturity basis and short of cash at the worst moment.
A run conducted through surrender forms and collateral notices
Insurance liabilities usually move slowly, with benefits and annuity payments distributed across long horizons, giving life companies more time than deposit-funded banks. Policy surrenders, institutional maturities, and derivative collateral demands can still compress years into days when markets turn sharply.
An annuity holder can often surrender a policy for cash, subject to a fee that declines over time. BIS research says US penalties commonly start around 10% and fall by one percentage point annually, while global surrender values can equal 30% of life-sector assets, with about half redeemable within a week.
When market yields climb above an older annuity's return, customers can cash out and reinvest while the insurer sells bonds or private loans whose values fell as rates rose. BIS simulations found that a sustained 25-basis-point annual increase could require asset sales near 2% a year, manageable in calm markets and painful when many firms want liquidity together.
Derivatives make this happen faster because collateral demands have contractual schedules. An insurer using interest-rate swaps may owe fresh collateral during a violent rate move, forcing it to produce cash even when its long-term hedge is sound.
A total of 28 private-equity-owned insurers carried close to $26 billion of Federal Home Loan Bank advances at year-end 2024, equal to 16% of all insurer FHLB borrowing. Their maturities and collateral requirements also follow a schedule that moves independently of an actuarial forecast.
The Fed's May 2026 financial-stability report put life insurers' nontraditional liabilities at $531 billion in late 2025, up 15% in real terms over a year but still small beside total assets. Illiquid investments represented roughly 37% of life-insurer assets in 2024, leaving plenty of sound loans that can't satisfy an immediate cash claim.
The latest warning signal came from Italy's Eurovita: its solvency ratio fell from about 230% to near 130% by the end of 2022 as bond losses and policy surrenders interacted, prompting special administration and a temporary redemption freeze in February 2023. Five insurers took over the policies, and the episode showed how policy liabilities can increase when customers see better rates elsewhere.
The NAIC now requires more detail behind private ratings, including Private Rating Letter Rationale Reports, and its private-credit work page, updated July 24, lists new filing and capital tools for bespoke assets. Delaware Life also disclosed an Aug. 17 agreement for TWG Global to exchange up to $6.5 billion of investments whose repayment depends on affiliates for the same amount of non-affiliated assets, subject to regulatory approval.
The companies say their capital and liquidity are strong and that they're cooperating, while Delaware Life's financial page lists $70.5 billion of admitted assets and $4 billion of capital and surplus at June 30. Its major financial-strength ratings stand at A-minus, with negative outlooks or watch status.
Private credit's appeal to insurers is economically coherent, and its illiquidity can pair well with long promises to policyholders. The danger appears when related-party ties blur who set the price, ratings substitute for market discovery, and several cash demands arrive together, creating a run whose queue consists of surrender requests, collateral notices and maturing advances.
