Offshore life reinsurance deals top $107bn as Bermuda dominates: AM Best

Offshore reinsurance transactions involving unaffiliated counterparties topped $107 billion across the 10 largest deals in 2025, as life and annuity insurers continued to increase the business ceded to offshore reinsurers, according to AM Best.

An AM Best report has revealed that the asset-intensive reinsurance market remains competitive despite a modest slowdown in annuity growth during 2025 and 2026. Demand for annuities has been supported by an ageing population and favourable crediting rates compared with other banking financial products, while new company formations, partnerships and private capital continue to enter both the primary annuity and asset-intensive reinsurance markets.

Reinsurance leverage across the US life and annuity industry has increased steadily since 2019, driven largely by insurers owned by private equity and asset managers, as well as publicly traded companies, particularly where reinsurance is placed with offshore domiciles.

Offshore reinsurance accounted for almost 56% of ceded annuity reserves, including modified coinsurance reserves, in 2025. AM Best said the use of offshore reinsurance has, to some degree, become necessary for market competitiveness, particularly among large companies active in the pension risk transfer market.

Bermuda remained the dominant offshore domicile, although the Cayman Islands increased its share of the market in 2025, driven heavily by several recently established sidecars. The Cayman Islands also submitted an application for Qualified Jurisdiction Status from the National Association of Insurance Commissioners, which would allow insurers to receive credit for reinsurance from a non-US domiciled company and reduce reinsurance collateral requirements.

The report highlights operational and regulatory considerations associated with cross-border reinsurance. The use of multiple global jurisdictions can increase complexity and opacity and may create challenges for regulatory oversight.

Offshore reinsurance involving affiliated entities has also increased. The share of ceded reserves going to offshore affiliates rose to more than 61% in 2025, compared with 40% in 2020 and earlier. Private equity and asset manager-owned companies have steadily increased reserves ceded to offshore affiliates since 2020, surpassing the amount ceded offshore by public companies in 2022.

However, only half of private equity and asset manager-owned companies use affiliated offshore reinsurance, AM Best noted.

The report said offshore domiciles can use discount-rate assumptions based on actual portfolio yields, potentially resulting in lower required reserves than under US statutory accounting. They can also permit a broader asset universe to support reserves. This can make offshore structures attractive to companies with expertise in originating or investing in structured and other higher-yielding assets.

Unaffiliated transactions exceeded affiliated deals in 2025 for the first time in three years. The 10 largest unaffiliated transactions accounted for more than 70% of reserves ceded to unaffiliated reinsurers and were largely modified coinsurance structures. Two variable annuity block transactions between subsidiaries of Venerable Holdings and Corebridge Financial were among the largest.

Four of the 10 largest transactions were also ceded to sidecars. Two-thirds of reserves ceded to unaffiliated companies in 2025 went to reinsurers not rated by AM Best, while the remainder was split evenly between reinsurers in Best’s Financial Strength Categories of Superior and Excellent.

AM Best identified collateral monitoring, integrated enterprise risk management and counterparty diversification as key risks associated with offshore reinsurance. Contractual collateral and recapture provisions, tighter investment guidelines and stress testing of reinsurance recapture risk can provide additional risk controls.

The report also noted that NAIC’s AG-55, which took effect on December 31 2025, brings asset-intensive reinsurance within the scope of asset adequacy testing.

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