NEW YORK ( TheStreet) --New York State is taking a hard look at the acquisition of annuities portfolios by private equity firms and strategics to make sure the securities aren't used to disguise risk in the same way financial institutions spread risk across asset-backed securities leading up to the financial crisis. There is one investor who has been careful to steer clear of the state regulator by the way he has gone about picking these portfolios: Warren Buffett. Private equity as well as strategic players making deals to acquire annuities portfolios are getting inquiries from the New York State Department of Financial Services (DFS). Headed by Superintendent Benjamin Lawsky, the regulatory agency is looking into how portfolio managers take on more risk with the new pools of capital they control. The agency has a reputation among lawyers and dealmakers for being the most aggressive state investigatory agency for insurance M&A in the United States. A handful of private equity transactions to buy annuities companies, as well as a few strategic deals, have to undergo a review process by the DFS. However, through careful sourcing of recent deals, Buffett's Berkshire Hathaway ( BRK.B) legally skirted the state's regulatory agency that oversees and approves insurance M&A, sources say. Assets in the variable annuity death benefit business include commercial mortgages, public and private bonds, and back up death benefit policies and guaranteed minimum income annuities. Regulators are inquiring into how portfolio managers approach risk when it comes to annuities' investable assets, a source said. New owners of annuities portfolios may elect to use these assets to back riskier investments like mortgage-backed securities. "They have injected some more risk into the system," said one banking source, of investors now making annuities deals to use investable assets in riskier bets, adding, "They've taken advantage of this regulatory arbitrage." To be sure, the activity is legal--it simply adds more risk to a portfolio. A company can only make a certain amount of investments in riskier assets like mortgage-backed securities (which, in turn, provide an opportunity for bigger returns) in greater amounts if the assets are re-insured elsewhere.