The assertion that private equity (PE) firms categorically use insurers as vehicles for risky private credit origination, excessive fee generation, and unbalanced affiliated investment activity relies on a series of assumptions that extend well beyond the evidence presented, credit rating analysis agency, KBRA, has argued.
The KBRA also argued that the thesis that PE-owned insurers are using private credit to socialise risk through state guaranty funds depends on a chain of references that extends well beyond the evidence presented.
“Private credit exposure is not equivalent to insolvency risk; PLRs are not inherently weaker because they are unpublished; affiliated transactions are not inherently abusive; and guaranty funds are not a standing taxpayer guarantee for private credit losses,” it stated.
Assertions regarding the possible negative impacts of private ratings and capital arbitrage should rely on empirical data, KBRA concluded.
