Andrew Granato

An exceptionally important conversation joined today by Andrew Granato, Assistant Professor of Law at the University of Texas at Austin, and Pranjal Dural, JD-PhD candidate at Yale.

They are the co-authors of a paper called Private Credit State Backstop, How Private Equity Socializes Risk Through Insurers.

Gentlemen, welcome to Monetary Matters.

Delaware Life and Clear Spring Life said investigators are looking whether billions of dollars in investments by the companies involving businesses with ties to the insurers were improperly being reported as unaffiliated.

That distinction matters because investments with affiliated businesses are subject to greater regulatory scrutiny to protect policyholders and guard against conflicts of interest, said Andrew Granato, a legal economist and assistant professor at the University of Texas at Austin Law School.

Granato said insurers' affiliated investments can create conflicts because the same person effectively controls both sides of a transaction.

That would allow the company owner to set favorable loan terms to their affiliated business or, if the borrowing company were to default, the same owner could decide whether to aggressively fight for repayment.