$2.1-billion deal plans to make the next Berkshire Hathaway

Bill Ackman has a new test case for a familiar Wall Street ambition: use an insurance company’s steady stream of premiums to help finance a broader investing empire.

On Thursday, Howard Hughes Holdings, the Texas-based company long known for developing master-planned communities and commercial real estate, said it had agreed to buy Vantage Risk, a Bermuda-based insurer, for $2.1 billion. The deal is meant to accelerate Mr. Ackman’s effort to remake Howard Hughes from a property developer into what he has described as a “modern-day Berkshire Hathaway” - a diversified holding company with permanent capital and a long time horizon.

“The acquisition of Vantage is a milestone event in the transformation of Howard Hughes into a diversified holding company,” Ackman said in a statement on Thursday.

For financial advisers, the significance is less about another headline-grabbing acquisition and more about the machinery behind it. Insurance businesses can generate “float”: premiums collected today that will be paid out later as claims. In the meantime, that money can be invested - a structure Warren Buffett used for decades to build Berkshire Hathaway. Howard Hughes said the Vantage purchase would be funded with a mix of cash and up to $1 billion of new investment in Howard Hughes stock from Pershing Square, Mr. Ackman’s hedge fund, which is also the company’s largest shareholder.

The move comes as more investment firms and alternative-asset managers chase the same playbook. Over the past several years, large private-capital groups have bought insurers - especially in life and retirement lines - to pair long-dated liabilities with private credit and other less liquid investments. Earlier this year, another activist investor, Daniel Loeb, won shareholder approval to pivot his London-listed vehicle toward reinsurance, underscoring how mainstream the strategy has become.

Vantage, however, sits on a different side of the insurance market. It focuses on property-and-casualty coverage for risks like litigation, political violence and cyber incidents - lines that can be volatile and more sensitive to big, sudden losses than many life and annuity products.

Howard Hughes called the acquisition a turning point in its transformation, and said Pershing Square would manage Vantage’s assets. For RIA and financial-planning professionals watching from the sidelines, the larger question is one that tends to surface whenever insurance and investment management merge: whether the promise of low-cost, investable float can be captured without taking on risks that appear only when the unexpected happens.