US prosecutors, including the Southern District of New York, are investigating two insurance companies, Delaware Life Insurance Company and Clear Spring Life and Annuity Company, owned by billionaire financier Mark Walter. The probe centers on allegations that these insurers failed to adequately disclose that certain private credit investments were tied to other entities within Walter's sprawling business empire, TWG Global.

Following subpoenas, Delaware Life reclassified some investments, significantly increasing its affiliated investments from 3% to about 42%. This led S&P Global Ratings to revise its outlook on the company to "negative." Regulators are concerned that asset managers may be using policyholders' funds for risky investments to subsidize their owners' other companies.

This scrutiny comes as the private capital industry increasingly utilizes insurance policies. The investigation, under SDNY's focus on Wall Street machinations, could have significant ramifications. Walter, who also owns stakes in the Los Angeles Dodgers and Lakers, has built a significant empire through Guggenheim Partners, a pioneer in matching illiquid assets with insurance.