Amy W. Huber

Amy Huber, Stefan Huber, Jinqing Shan, Christina Zhu (Working), Buying from the Family: Private Equity-Owned Insurers and Their Affiliated Investments.

Abstract: Private equity (PE) firms increasingly own insurers as direct subsidiaries. This ownership places insurers within organizations that also originate, manage, and securitize credit assets. We study whether and on what terms insurers directly owned by PE firms provide financing to affiliated credit businesses. Using a novel dataset linking insurer ownership structures, transactions, holdings, and regulatory stress-test outcomes, we document three findings. First, PE-owned insurers provide substantial financing to affiliated credit businesses: 60.8% of their 2024 structured-security investments are issued by affiliated entities, compared to 1.7% for other insurers. Second, comparing purchases of the same security on the same day, PE-owned insurers pay systematically higher prices when buying from affiliated issuers, implying more favorable financing terms for those issuers. Third, affiliated investments offer higher promised yields but substantially greater downside risk under stress scenarios. We estimate that the overpayment corresponds to a financing subsidy of approximately $27 million per year for affiliated issuers, while the elevated risk profile would reduce insurer capital by 8.9 percentage points under a 2008 financial crisis stress scenario. Together, our results suggest that PE-owned insurers function as a captive source of capital for affiliated credit activities, raising concerns about policyholder protection and financial stability.