MICHAEL BURRY JUST WARNED THAT PRIVATE EQUITY MAY BE USING LIFE INSURERS TO PUSH LOSSES ONTO THE PUBLIC.
Burry is highlighting a new paper by two Yale/Texas researchers, "Private Credit's State Backstop: How Private Equity Socializes Risk Through Insurers."
Firms like Apollo, KKR, and Blackstone have bought up life insurers. They've filled these insurers' balance sheets with private credit, loans that are hard for regulators to check or price properly.
Life insurers now hold $849 billion in this kind of debt, more than double what they held in 2014.
Here's the trick: If one of these insurers can't pay its bills, states step in to protect policyholders. They do this by charging other insurance companies a fee to cover the gap.
Those companies then get to subtract that fee from the taxes they owe the state. So in the end, the public pays for it through lower state tax collections, without it ever being called a bailout.
This has already started happening. Two companies, First Brands and Tricolor, went bankrupt in 2025 after lenders realized they couldn't properly value the debt they were holding.
And the next risk is AI: Big tech companies are funding their AI data centers using the same kind of complex, hard to value debt.
If AI spending doesn't pay off fast enough, that risk doesn't stay with tech companies. It lands on the same insurers already holding piles of this debt.
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