New York’s financial regulator is scrutinizing what he called the “troubling role” of private equity firms as they expand into the insurance industry through acquisitions, according to a speech today.
Private-equity firms “may not be long-term players in the insurance industry and their short-term focus may result in an incentive to increase investment risk and leverage in order to boost short-term returns,” New York Department of Financial Services Superintendent Benjamin Lawsky said today in prepared remarks. “This type of business model isn’t necessarily a natural fit for the insurance business, where a failure can put policyholders at significant risk.”
Leon Black’s Apollo Global Management LLC has agreed to buy four insurers since 2008, including a $1.8 billion deal in December for Aviva Plc’s U.S. life and annuity business. A firm owned by Guggenheim Partners LLC shareholders agreed the same month to buy a variable-annuity unit from Sun Life Financial Inc. for $1.35 billion.
“DFS is moving to ramp up its activity” monitoring private-equity firms’ role, he said today, without naming companies, at the Hyman P. Minsky Conference in New York. “We hope that other regulators will soon follow suit.”