I was looking at Dan Scwarcz's lastest paper on Shadow Insurance, which is a thing:
Shadow insurance – defined as life insurers’ reinsurance of policies with captive insurers that are not “authorized” reinsurers and do not maintain a rating from a private rating agency – creates important risks to policyholders, the insurance industry, and potentially even the broader financial system. Although the standard state regulatory safeguards help mitigate some of these risks, they leave other hazards of shadow insurance largely unchecked. Even granting that shadow insurance likely helps reduce the cost of insurance associated with the excessive conservatism of some state reserving rules, the practice ultimately undermines insurance markets by impeding accurate risk assessments and tradeoffs by policyholders, regulators, and other market participants.
Of course, there may be a real world reason for this - shadow institutions are in theory nimbly entering markets that heavily regulated incumbents can't serve well. This is the regulation is bad story of the growth of shadow finance.