On the latest episode of the Investors First Podcast, hosts Steve Curley, CFA (Founder, 55 North Private Wealth) and Chris Cannon, CFA (CIO/Principal, FirsTrust) welcomed Andrew Granato, J.D., Ph.D. & Pranjal Drall to discuss Private Equity, Insurance, and Who Pays When Insurers Fail.
Insurance companies sit at an increasingly important intersection of investing, private credit, and financial stability. Andrew Granato and Pranjal Drall have been studying how the growing involvement of private-equity firms in insurance is changing insurer balance sheets and potentially shifting risks among policyholders, other insurers, and taxpayers. Andrew Granato is an Assistant Professor at the University of Texas School of Law and holds a J.D. and Ph.D. in Financial Economics from Yale, previously serving as a Senior Associate Economist at the Federal Reserve Bank of Chicago, while Pranjal Drall is a J.D.-Ph.D. candidate in Financial Economics at Yale Law School and the Yale School of Management.
In this episode, Andrew and Pranjal trace the evolution of private-equity ownership of insurance companies, from the traditional relationship between insurers and asset managers to the rise of firms such as Apollo and Athene. We discuss why annuity assets have become attractive sources of long-term capital, the growing role of private and structured credit on insurer balance sheets, and how affiliated transactions can create potential conflicts between policyholders, asset managers, and private-equity investors.
We also explore the unusual structure of U.S. insurance regulation, including state-based oversight, offshore reinsurance, and the mechanics of state insurance guarantee funds. Andrew and Pranjal explain what happens when an insurer fails, why healthy insurers can ultimately be responsible for supporting policyholders of failed competitors, and how tax credits can shift some of those costs back to taxpayers over time. We close with potential reforms, including prefunding guarantee systems and tying insurer assessments more closely to balance-sheet risk, as well as what advisors and policyholders should consider when evaluating increasingly complex insurance products and carriers.
Please enjoy the episode. You can follow us on Twitter (https://twitter.com/cfaorlandofl) & LinkedIn (https://www.linkedin.com/company/cfasocietyorlando/) or at investorsfirstpodcast.com.