Private Equity Firms Face Life Insurer Safety Questions at Senate Hearing

“Many workers are very, exceptionally nervous about that,” Brown said.

Warren said that private equity firms, or companies that invest in private stock and bonds, have bought up hospitals, newspapers, homes and retail chains, and now have set their sights on Americans’ retirement savings.

”Today, private equity firms control more than 10% of all life and annuity assets in the United States, despite having zero presence just over a decade ago,” Warren said.

She argued that the companies try to profit by taking more investment risk than ordinary insurance company owners do.

“The pensions are more vulnerable to being wiped out by a market downturn, which endangers the insurance company’s solvency,” Warren said.

She asked members for support for S. 3022, the Stop Wall Street Looting Act bill, which would impose new private equity firm rules, such as limits on dividends from newly acquired companies to the new owners, and extra protections for the workers affected when private equity firms go bankrupt.

Seitz told Warren that when pension plans move into the hands of life insurers, “they’re covered by the individual state guaranty funds, and it’s an area of focus for our office to make sure that the state regulatory mechanisms are being designed appropriately to reflect these new transactions.”

Warren said Seitz had not given her a clear answer about whether group annuities provided by private equity-owned life insurers are more or less secure than the original employer-provided pension plans.

Sen. Bill Hagerty, R-Tenn., asked Birrane whether state insurance regulators regulate private equity-owned insurers differently than they regulate other insurers, then agreed with Birrane when Birrane said private equity firms are regulated somewhat more tightly than other life insurers, and that states have good tools in place for overseeing the private equity firms that own life insurers.

Sen. Jerry Moran, R-Kan., asked Seitz about suggestions that private equity firms might buy insurers and then turn around and sell the insurers too quickly, to generate fast profits.

Seitz said he had not heard reports of those kinds of transactions affecting insurers.

Moran, who represents the home state of Security Benefit, concluded his time slot during the hearing by saying that private equity firms had helped both life insurance companies and life insurance company employees in his state.

The Senate Banking Committee held a hearing Thursday on insurance in Washington. (Photo: Senate Banking Committee)