An ongoing federal investigation into billionaire Mark Walter's business empire is raising alarm bells about Wall Street's use of insurance capital to finance private credit and other illiquid investments.
Bloomberg reported that Walter's TWG Global holding company said in a filing that it will wind down its exposure to affiliated businesses by up to $6.5 billion after the transactions drew scrutiny from federal investigators. This comes after the Department of Justice homed in on loans that should've been marked as affiliated transactions.
Walter's TWG Global holding company will buy up to $6.5 billion of affiliated assets from Delaware Life Insurance Co. in exchange for an equal amount of unaffiliated investments. Clear Spring Life and Annuity Co., another TWG-controlled insurer, separately reduced related-party transactions by $90 million.
The moves begin unwinding more than $20 billion of loans and investments that the insurers acknowledged should have been classified as affiliated transactions.
"Tripping over these requirements can constitute fraud," said Derek Reisfield, co-founder and former chairman of MarketWatch, as well as a former McKinsey consultant, who was quoted by The New York Post.
Reisfield said that heavy exposure to businesses connected to an insurer's owner poses a very high risk.
"The risk is that concentrated loans to related parties go south, an
