Egan-Jones rated $40 billion of insurer debt as scrutiny mounts

U.S. insurers hold about $40 billion of debt investments rated by Egan-Jones, a firm facing a whistleblower lawsuit and regulatory scrutiny, a Wall Street Journal analysis found.

"There can be impacts to policyholders if any of the rating agencies do a poor job," Paul Newsome, insurance analyst at Piper Sandler, said.

Insurer debt rated confidentially by Egan-Jones fell more than 30 percent in 2025 to about $40 billion from $58 billion in 2024, a period when total private-letter rated debt grew. The Securities and Exchange Commission questioned the firm's reliability, and Bermuda's regulator removed Egan-Jones from its list of recognized ratings providers in January.

The credit rating on each investment generally determines how much capital an insurer must set aside against the risk of loss, so a better rating means less capital is required. Private credit in life insurer portfolios swelled to an estimated $980 billion, about a quarter of total holdings, as of 2025, according to AM Best.

The scrutiny arrives as insurers chase higher returns in private credit, paying for confidential "private letter" ratings that often accompany illiquid deals. Insurers held about $480 billion of privately rated debt instruments in 2025, more than 10 times their $47 billion value in 2018, the Journal's analysis showed.

Egan-Jones is being sued by two former executives who allege they were fired after telling securities regulators about conflicts of interest and pressure to inflate ratings. The firm denied the allegations, saying the former employees were establishing a competing ratings business.

In a September 2023 letter, the SEC wrote that Egan-Jones's incentives for analysts could lead to compromised ratings. In March, the agency questioned the firm's capacity to "consistently produce credit ratings with integrity" on asset-backed securities. Egan-Jones said the incentives were part of a work-tracking system commonly used by businesses.

Walter-linked insurers hold the largest stakes

Among the biggest holders are insurers controlled by Mark Walter, the financial titan who owns the Los Angeles Dodgers. Egan-Jones rated about $2.6 billion of loans held by Walter's insurers, including debt issued by American Media Productions, a firm controlled by a Walter affiliate that owns the Dodgers' local TV broadcaster.

Loans tied to Walter's business empire are at the center of a federal investigation into possible fraud. Egan-Jones provided ratings for 37 percent of Delaware Life's private-letter rated debt and 70 percent of Clear Spring's, according to the Journal. Between them, the two insurers hold nearly $300 million in American Media debt, which Egan-Jones rated BBB, the second-lowest investment grade, from 2019 until at least November 2024.

Other insurers with significant Egan-Jones-rated debt include TIAA with $5.5 billion, Mass Mutual with $3.4 billion, Principal with $2 billion, Security Benefit Life with $1.7 billion and Allianz Life with $1.6 billion. Allianz said late last year it asked asset managers to stop working with Egan-Jones and to get a second rating for any Egan-Jones-rated debt.

The Journal found 52 investments rated by both Egan-Jones and another firm, with Egan-Jones's grades on average one notch higher and at least three notches higher in two dozen cases. The firm disputed the findings. The retreat from Egan-Jones and the federal probe into Walter's insurers could force affected companies to reassess capital requirements, with policyholders bearing the risk if ratings prove inflated.

This article is for informational purposes only and does not constitute investment advice.